In probably the most ironic piece of financial news to emerge so far this century, the Greek authorities have stepped in to recue a troubled bank. The Hellenic Financial Stability Fund (HFSF) was established as part of the measures agreed by the Eurozone countries and the IMF when they made their €110 billion bailout available to Greece in May 2010. HFSF has assets worth €10 billion at its disposal.
The beneficiary (if you can call it that) of the first HFSF rescue has been Proton Bank. HFSF is being operated by the Greek Central bank. Under the rescue, Proton Bank will be spilt into two parts: a healthy arm which will be responsible for the bank’s safe assets and deposit accounts and a “toxic debt” arm which will be liquidated to generate as much value as possible such that third party claims against the bank can be met.
The demise of Proton Bank has occurred against a backdrop of allegations of breach of anti-money laundering regulations by some former managers of the institute. These questionable transactions amount to €51 million in loans and led to the central bank sacking the board of directors at Proton. The surviving arm of the bank will have the HFSF as its sole shareholder.
Trading in Proton Bank shares was suspended on the Athens Stock Exchange. The bank, which has 31 branches offering retail banking services, is one of Greece’s smallest banks. Its assets were reported to be worth €3.8 billion when evaluated in March 2011.
The Greek public debt stands at €310; to put this in perspective, it is less than half of the €700 billion in global credit exposure that Dexia Bank (which was bailed out by Belgium, France and Luxemburg at the weekend) has on its books.