Haircut fears chops 17% off Greek bank index

Financial Times
October 24, 2011

Share prices of Greek banks have tumbled on the Athens stock exchange on fears that a 60 per cent haircut on the country’s bonds would trigger the nationalisation of its six largest lenders.

The ASE banking index fell by 17 per cent on Monday amid rumours that European Union leaders were set to endorse a significantly bigger haircut than the 21 per cent agreed in July under the terms of Greece’s second international bail-out.

“The bigger the haircut, the bigger the possibility that the largest part of the Greek bank sector will be nationalised,” said one Athens analyst.” No bank has a viable alternative capital raising plan.”

“The government is essentially asking big Greek corporate families to give up their banks after suffering a massive dilution,” the analyst said.

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