Greek lenders plunge after haircut talk

SHARES in Greece’s major lenders plunged by more than a fifth yesterday amid growing talk that Athens could impose a 60 per cent haircut on holders of its debt.

Attica Bank lost 24.9 per cent, EFG Eurobank lost 20.3 per cent and Alpha Bank, which is set to merge with EFG, lost 19.4 per cent.

A large haircut would create huge losses for the banks, which are forced to hold Greek government bonds by liquidity regulations.

Alpha and EFG Eurobank also failed to clear their merger with shareholders yesterday after not enough people showed up to the meeting – a fairly frequent occurrence in Greek finance. They set a date for another meeting next month.

The ECB is reportedly coming around to the idea of increasing haircuts on Greek debt beyond the 21 per cent agreed with private debt-holders in July.

But the Institute of International Finance (IIF), a regional bank lobbying body, yesterday declared that going too far would be “tantamount to a default” or “credit event”, something the ECB had been anxious to avoid in the summer.

In order to avoid a technical default, Greece has to ensure that its creditors agree to any haircut on the bonds they own.