Hellenic Bank propose a new scheme to increase share capital

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Hellenic Bank, one of four Cyprus systemic banks participating in the European Central Bank’s asset quality review this month, will examine a potential increase in capital in the event of not meeting the tests standards.
Hellenic Bank, one of four Cyprus systemic banks participating in the European Central Bank’s asset quality review this month, will examine a potential increase in capital in the event of not meeting the tests standards, plans for which are set to go ahead later on this week.

The ECB stress tests will be published on the 26th of October and comprises an analysis of each bank’s balance sheet at the end of 2013, assigning risk-weighted value to its holdings and a subsequent estimation of recapitalisation needs under both normal economic circumstances and in the event of extreme economic conditions.

Banks considered to not have enough capital will receive a six month deadline to raise more funds while those found undercapitalised in extreme circumstances will receive a nine month deadline. For the first half of this year, Hellenic posted a loss of €95.5m mainly on increased provisions for non-performing loans (NPLs) which make up 53% of total loans issued.

Financial Analyst Alecos Sergides stated that for this project to be successful, the current shareholders must have the ability and willingness to invest more money. ‘If some of them lack the funds to increase their investment by participating in the scheme, they must accept that a third party will then participate, which suggests that they will have to accept that their share will shrink,’ he said.