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11th October 2011

Greek Proton Bank split and rescue

Proton Bank was closed over the weekend and the bank nationalised. Emerging will be a good and bad bank. In August of this year a rescue fund was announced for the bank funded in part by a compulsory levy on other Greek banks and partly from the government. At the time talk of splitting off a bad bank was dismissed.


Now the Bank of Greece has chosen to implement the rescue it has introduced after all a split between Good and Bad bank. The bad assets relate to poor, and possibly illegal in part, corporate lending, the bank has no significant sovereign debt holdings. The good bank will receive the rescue fund and will have a CT1 (Core Tier 1) ratio of 10.6%, therefore above the threshold 10% which is required from all Greek banks by January 1st of next year. The government is hoping to gain back the funding from the profit on sale of assets. The point is made that shareholders will be last in the queue of creditors and the shares were suspended.


Around 30% of the bank's total loan book before the split was was to Lavrentis Lavrentiadis controlled companies. Lavrentiadis was the largest shareholder in the bank although has reduced his shareholding in recent months. The board was restructured under pressure from the Bank of Greece earlier this year. The earlier board had few if any members with banking experience. Lavrentiadis is under investigation for embezzlement and money laundering. He currently resides in London where he has set up a private equity fund and denies any wrong doing.