Breaking news: The first nationalized Greek bank. No problem for deposits, shareholders lose almost everything

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This Monday morning will not be forgotten in Greek economic history. At 08.00 in the morning the minister of economy announced that “Proton Bank” has been nationalized. This is a small private bank that was involved in several scenarios and rumors over the past few months.

Greece’s central bank activated a rescue fund set up under an EU-led bailout in May 2010 to restructure Proton Bank SA (PRO), with the Hellenic Financial Stability Fund becoming its sole shareholder.

Athens-based Proton will reorganize into a new lender called New Proton Bank which will have a 10.6 percent capital adequacy ratio, according to an e-mailed statement from the Greek Finance Ministry today. A separate Bank of Greece (TELL) statement said the capital adequacy was well above regulatory thresholds.

“The Financial Stability Fund provided the necessary capital for the ‘good bank’ and became its sole shareholder,” the central bank said. “The deposits of all customers are secured and the smooth continuation of business is guaranteed through the new bank.”

The Greek fund received 10 billion euros ($13.5 billion) under the 110 billion-euro May 2010 bailout of the country, to provide capital and ensure the stability of the banking system. Proton Bank, with assets of 3.5 billion euros, has been buffeted by the debt crisis, combined with an investigation into possible money laundering.

The old bank has been placed into liquidation with the proceeds to be used to cover the claims of third parties, according to the central bank. The shareholders will rank last as claimants.

As analysts in Greece and Europe say, this news shows that:

·         The deposits of Greek banks are safe

·         The shareholders will lose the biggest part of their shares’ value

Remember this date in the future. It all started today…

Sources:

www.capital.gr

www.bloomberg.com

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