Greece wants to tap bank rescue funds to plug funding gap

08 Jan, 2014

ATHENS: Greece and its international lenders are at odds over plans by Athens to tap funds from a bank rescue vehicle partly to cover its 2014-15 funding gap and avoid a third bailout package, daily Kathimerini reported on Wednesday. Athens will be financed by bailout loans until the second half of 2014, when it hopes to tap bond markets again.

It then faces a funding gap of nearly 11 billion euros for 2014-15, according to the International Monetary Fund, one of the lenders, and is mulling ways to plug the hole.

The Hellenic Financial Stability Fund (HFSF), the bank rescue vehicle set up to recapitalise Greece's four big banks and cover the costs of winding down non-viable lenders, has a remaining capital buffer of about 10 billion euros. Greece's international creditors, led by the European Central Bank, oppose the idea of tapping HFSF funds to plug the gap and want to keep the buffer as a safety cushion for banks, Kathimerini said, citing sources close to the talks.

Athens is keen for stress-test terms that will contain any additional capital needs for its top four banks and leave funds at the HFSF for its plans and has asked for a reduction in the required capital adequacy ratio to 8 from 9 percent.

The international creditors are oppose this reduction, the paper said.

The results of a health check on Greece's top four banks by the Bank of Greece are expected to be released later this month.

Apart from tapping HFSF funds, the paper said Greece's plans on plugging the 2014-15 funding gap also assume savings of about 3 billion euros from lower interest on official sector debt and raising money in the market with a small bond issue.

Twice bailed out with 240 billion euros by its euro zone partners and the International Monetary Fund, Greece expects a primary budget surplus this year, excluding debt interest payments, will allow it to get debt relief from its lenders.

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