The sale is part of restructuring efforts by National Bank (NBG) (NBGr.AT) aimed at boosting its capital base.

Greece’s top four banks are implementing restructuring plans agreed with the European Commission as part of conditions imposed for their bailouts. The plans involve job cuts, branch closures and asset sales.

“The agreement will close in the next 10 days. Invel will acquire about 66 percent of Pangaia for more than 600 million euros ($808 million),” one of the bankers said.

Invel will pay part of the purchase price for Pangaia in cash, contribute equity in the form of real estate and finance the rest with a loan from National Bank, the bankers said.

Dutch-based Invel was set up in March 2013 to take advantage of opportunities in the European real estate market by offering investors the ability to co-invest in deals.

BSG Real Estate, controlled by Israeli businessman Beny Steinmetz, will be one of the co-investors in the transaction, the bankers said.

“NBG will retain management control at Pangaia for five years,” the other banker said. “The loan by NBG for part of the majority stake will be at a spread of 275 basis points, secured by real estate contributed by Invel.”

The bankers said the sale would strengthen National Bank’s Core Tier 1 capital adequacy ratio by 40 basis points to 9.6 percent. The Bank of Greece plans to conduct stress tests later this year.

Pangaia’s real estate portfolio includes office buildings, branches operated by NBG and other property recently acquired from the country’s privatization agency.

Pangaia may pursue a listing on the Athens stock exchange by 2015, one of the bankers said.

The agreement has been approved by the Hellenic Financial Stability Fund (HFSF), the bank rescue vehicle that recapitalized the country’s big four banks in the summer and is now their major shareholder, one of the bankers said.

Last month, Canadian firm Fairfax Financial Holdings (FFH.TO) announced its intention to raise its stake in Greek real estate firm Eurobank Properties.

(Editing by Jason Neely and Keiron Henderson)

Source: http://mobile.reuters.com/article/idUSBRE9AG06Z20131117?irpc=932

But now Mr. Provopoulos faces one of the bigger challenges of his tumultuous reign: an investigation into whether he abused his position by clearing a banking deal involving his former employer and a business magnate who was subsequently charged with embezzlement and fraud.

In a confidential report issued last May, a senior Greek prosecutor said that Mr. Provopoulos approved the 71 million euro ($96 million) deal despite warnings from his staff regarding the buyer’s finances. The report, parts of which were reviewed by The New York Times, hints at the scope of the investigation, about which little has been previously disclosed.

There is no evidence that Mr. Provopoulos profited personally from the transaction, which was ultimately approved. But his role — and the chance, however remote, that he might face criminal charges — could have ramifications beyond Greece. Other countries in the euro zone have invested more than 40 billion euros to shore up the Greek banking system. In the process, they have pressed Athens to clean up the corruption and crony capitalism that have been at the root of the country’s problems.

According to the report, Mr. Provopoulos allowed the businessman, Lavrentis Lavrentiadis, to enter into a deal with Mr. Provopoulos’s former employer, Piraeus Bank, at a vastly inflated price. The transaction enabled Mr. Lavrentiadis to gain control of another bank, Proton, and, in the process, benefited Piraeus, which was struggling.

The dossier cites a number of red flags that banking supervisors raised about Mr. Lavrentiadis, including excessive debt and suspicions of money laundering. Last December, he was charged with embezzling from Proton to prop up his other interests. He is being held in prison pending trial and has denied the charges.

Proton Bank had to be bailed out by the Greek government, at a cost of 1.3 billion euros.

The deputy prosecutor at the time, George Kaloudis, argued in his report that there were enough questions concerning the transaction to warrant further investigation of the central bank’s handling of the affair. Mr. Kaloudis, who is no longer in his position, declined to comment.

Mr. Provopoulos, in an interview, said all of his actions were taken to prevent the Greek financial system from imploding and that the central bank’s board unanimously approved the Proton deal. He added that Mr. Lavrentiadis had a 20-year record as a successful entrepreneur and had promised to make the bank a more conservative institution.

“He was ready to inject additional capital in the bank, and he satisfied all formal and legal requirements,” Mr. Provopoulos said. He pointed out that Mr. Lavrentiadis was ultimately arrested and charged based on evidence provided by the central bank.

The controversy over Mr. Provopoulos and the Greek bank bailouts echoes the public discontent over the taxpayer-financed rescues of large American banks during the financial crisis that began in 2008. Five years ago, Henry M. Paulson Jr., the former Goldman Sachs chief who was then Treasury secretary, and others with ties to Wall Street orchestrated those bailouts, prompting a public outcry.

In Greece, Mr. Provopoulos fast-tracked a slate of deals that transformed Piraeus Bank, where he had been a vice chairman before joining the central bank, into the nation’s most powerful bank.  The legal saga is also a visible sign of a behind-the-scenes power struggle between Mr. Provopoulos and the government of Prime Minister Antonis Samaras over control of the country’s banks, which for decades have been a source of patronage and influence in Greece.

Whether prosecutors will formally charge Mr. Provopoulos is unclear. Mr. Lavrentiadis’s lawyers have argued that their client’s case and that of Mr. Provopoulos must be investigated together, as Mr. Kaloudis suggested in his report.

The governor’s supporters say that the inquiry is politically motivated and baseless, an attempt to force out Mr. Provopoulos so that the largely discredited political class can reassert itself. But Mr. Provopoulos’s critics argue that the playbook used in the Proton deal — described as a series of back-room maneuverings that rewarded Michalis G. Sallas, the domineering chairman of Piraeus Bank — was deployed repeatedly, most recently when Piraeus bought the Greek operations of three Cypriot banks last March at a knockdown price of 524 million euros, and a few months later booked a profit of 3.5 billion euros on the transaction.

“The position of the governor has become very strong, and I do not think that he has been subjected to proper scrutiny,” said Pavlos Eleftheriadis, a law professor at Oxford University who has been critical of how special interest groups in Greece have expanded their influence and power in recent years. “There was the spectacular failure of Proton, and there are questions about the Piraeus deal in Cyprus. We need root and branch reform of all our institutions — including the Bank of Greece.”

It is not hard to see why Mr. Provopoulos has become a lightning rod. He has done little to disguise his low regard for the political establishment, openly criticizing its fiscal policies and privately upbraiding both the conservative New Democracy party and the left-leaning Pasok party for not attacking Greece’s economic problems with more force and speed.

“I am not in this job to please politicians,” Mr. Provopoulos, 63, said in an interview here in his capacious office. “I am not just an ordinary citizen. I have much larger responsibilities. My actions will be judged in the future after the dust has settled and people are in a better position to assess the results.”

His senior status within the governing council of the European Central Bank, which, along with the International Monetary Fund and the European Commission, has pursued a brutal austerity regime for Greece, has fed suspicion that he identifies more closely with technocrats in Brussels and Frankfurt than with the beleaguered Greek public.

And he has indirectly challenged the authority of Mr. Samaras, who became prime minister in 2012 and who had expected that the role of banking kingmaker would be reserved for the prime minister, as has been the custom in Greece.

For decades, political influence in this country has been a direct function of a politician’s ability to borrow and spend, with local banks, as the main buyers of Greek government bonds, acting as the primary facilitators. Under an austerity regime, such an approach is no longer possible. And as governments have come and gone — to date, Mr. Provopoulos has survived five prime ministers and seven finance ministers — the power of the Bank of Greece’s governor has only solidified.

Trained as a professor of economics, Mr. Provopoulos is no ivory-tower academic. His style — self-confident, if not a touch combative — conveys the attitude of a top-level bank executive, the role he performed for a decade before taking charge of the Bank of Greece in 2008. As he sees it, his experience as a no-nonsense deal maker has been critical to Greek banks, in preventing them from succumbing to last year’s near-fatal bank run and in their re-emerging now with a fresh charge of capital, courtesy of the European taxpayer.

His response to the bank panic had the feel of a military campaign. Under cover of nightfall, cargo planes from Frankfurt and other European capitals flew in pallets of cash, which were then transferred by boat, truck and train to banks throughout the country. And with one Greek bank after the other facing possible failure, the spate of bank mergers that he orchestrated in such a short period was unprecedented.

“My experience as a commercial banker was very helpful,” he said. “I believe we did a good job — if the banking system had not been protected we probably would have had to exit the euro area.”

During the struggle to salvage the Greek economy, he said, nodding gravely in the direction of his desk, “the center of gravity was right here.”

Mr. Provopoulos’s six-year term concludes next June, and while it is customary for new prime ministers to name their own central bank heads, a growing number of bankers and investors argue that Mr. Provopoulos should be reappointed in light of the country’s fragile financial condition. But the Proton investigation could change that.

To some extent, the Proton transaction gets at the essence of what has made Mr. Provopoulos such a polarizing figure here. Pulled together quickly at the end of 2009 and early 2010, the deal drew upon the central banker’s crisis management skills and showed his willingness to make a chancy bet in the hope that the payoff of a more stable banking system would justify the risks. But it also shines a not-so-flattering light on the murky give-and-take among bankers, business leaders and government officials that has long been par for the course in Greece and that many believe lies at the root of the country’s economic collapse.

At the time, Mr. Lavrentiadis was sitting on over 2 billion euros of debt. Piraeus, under Mr. Sallas, was looking to unload its 31 percent stake in Proton, which it had acquired in 2008.

The deal, as Mr. Provopoulos saw it, would solve two problems: it would give Piraeus a needed infusion of cash and the shaky Proton a new owner who promised to invest in and stabilize the institution.

The Proton deal was announced on Dec. 29, 2009. The next day, Mr. Lavrentiadis wired 71 million euros to Piraeus, according to the prosecutor’s report — even though the sale had not been formally approved by the central bank’s regulatory division.

As weeks passed without a nod from regulators, Mr. Lavrentiadis became worried that he would never gain control of the bank. Mr. Lavrentiadis told prosecutors that he met with Mr. Sallas, the Piraeus chairman, in late March and said that he had decided to pull out of the deal.

“Don’t do that,” Mr. Sallas replied, according to Mr. Lavrentiadis’s account. “Let me call my good friend George Provopoulos, and he will do what is needed to get this deal cleared.”

A few days later, the central bank approved the sale.

Piraeus Bank, in a statement, said: “The allegation that Piraeus Bank or its chairman intervened inappropriately to facilitate the sale of Proton Bank shares to Mr. Lavrentiadis bears absolutely no resemblance to reality and reflects the diversionary defense line recently concocted by Mr. Lavrentiadis, a full 28 months after he was initially charged.”

At the root of Mr. Provopoulos’s defense is his view that at the time of the deal, in March 2010, Mr. Lavrentiadis had a strong enough reputation as a businessman to be approved as a new bank owner in Greece. This was not, however, an opinion that was shared by the head of Cyprus’s central bank, who rejected an attempt by Mr. Lavrentiadis to buy a bank in Cyprus during the same period, contending his finances were questionable.

In retrospect, Mr. Provopoulos said, he accepts that Mr. Lavrentiadis was a bad actor. But he rejects the criticism that the Proton sale and Piraeus’s Cypriot deals reveal any favoritism to his former employer or Greek banks in general.

“My first and only priority is to ensure the stability of the financial sector,” Mr. Provopoulos said. Mr. Sallas of Piraeus was prepared to take risks that others were not, he added.

As for Mr. Lavrentiadis, he continues to protest his innocence.

“If I am guilty,” he said recently to government prosecutors, “then so are Mr. Sallas and Mr. Provopoulos.”

bank

TT and Proton, victims of Greece’s economic crisis, were split into “good” and “bad” parts and are fully owned by the Hellenic Financial Stability Fund (HFSF), a capital backstop with 50 billion euros ($65 billion) of bailout money.

Greece agreed with its international lenders – the European Commission, the International Monetary Fund, and the European Central Bank – to sell the two banks by mid-July in order to get more bailout funds.

“Goldman is the sell-side adviser on Hellenic Postbank, Rothschild on Proton,” said one of the officials. The two were most likely to be bought by bigger Greek banks – Alpha , National or Eurobank, he said.

A senior Alpha Bank executive told Reuters on Friday Alpha would look into buying TT. “Yes, we are interested in Postbank,” he said.

Piraeus Bank has said it will not make any more acquistions in the near future after taking over Societe Generale’s and Millenium BCP’s Greek units and the local operations of three Cypriot banks.

“Eurobank is one of the possible buyers, a lot will depend on what the other banks do. The advisers will approach all of them,” a second banker said.

Authorities wound down TT in January after efforts to sell it failed. They stripped out bad loans from its portfolio and transferred less risky assets and deposits to a new entity called New Hellenic Postbank. The bad loans are being sold.

The HFSF pumped 4 billion euros into the bank to cover its funding gap – the difference between assets and liabilities – and a further 500 million to recapitalise it.

Like other Greek lenders, TT was hit by writedowns on Greek bonds and loan impairments as the country endures its sixth year of deep recession.

Eurobank, Alpha and National had expressed interest in the old TT but withdrew in January, leading authorities to wind it down.

The healthy TT has assets of 13.7 billion euros, deposits of 10.7 billion and a network of about 200 branches. Proton is a much smaller bank with deposits of one billion euros and 1.3 billion in assets.

Source: http://www.reuters.com/article/2013/06/28/greece-banks-idUSL5N0F428M20130628

Offshore companies owned by Michael Sallas and his two children paid for shares in the Piraeus Bank, the country’s fourth-biggest, by borrowing money from a rival bank.

Together the shares make the Sallas family the largest shareholder in Piraeus, with a combined stake of over 6 percent. The purchase of these shares has not been declared to the Athens stock exchange by Piraeus.

The loans to Sallas, who was executive chairman of Piraeus Bank until last month and remains its non-executive chairman, raise new questions about the stability and supervision of the Greek financial system at a time when European taxpayers and the International Monetary Fund are bailing out its banks with more than 30 billion euros.

The IMF had no comment on the issue, and a spokesman for the Bank of Greece declined to comment on Sallas’s holdings in Piraeus, citing banking confidentiality guidelines. “Our supervision department cannot comment on specific prudential data available or actions taken with regard to any specific bank as such information is confidential,” he said.

According to audit reports seen by Reuters, most of the money borrowed by companies linked to Sallas was used to buy shares in a Piraeus Bank rights issue in January 2011. The issue was designed to strengthen Piraeus’s capital base.

The disclosure highlights concerns that Greek banks have been borrowing money from each other and using it to meet recapitalization requirements, but not making that clear.

“This (the Greek financial system) is a closed circuit, operating as a system of power with no transparency and effective supervision,” said Louka Katseli, professor of economics at the University of Athens and former Greek minister of economy. “Through triangle deals between banks, businessmen and other banks, capitalization requirements were fulfilled without new money injected.”

Piraeus Bank and Sallas declined to answer specific questions for this story, but offered an interview later this month. On Sunday Sallas issued a statement to the Greek media attacking Reuters and accusing the news agency of “slandering” and “undermining” the bank.

“It is not the first time that I or Piraeus Bank have been the target of attacks,” the statement said. “What should be of concern to all of us in the present situation is the safety and the further strengthening of our banking system.”

Reuters Global Editor for Ethics and Standards Alix M. Freedman said: “Our coverage of Piraeus and of the Greek banking system has been accurate and fair to every person and institution involved.”

In April, a Reuters investigation found that Piraeus had failed to tell shareholders it had rented expensive properties from a network of private companies run by the Sallas family. The bank has sued Reuters for defamation over the story, claiming 50 million euros in damages.

Reuters has also reported allegations of mismanagement at the Proton Bank and at a Cyprus-based bank formerly known as the Marfin Popular Bank that operates in Greece. Proton’s former president and major shareholder, Lavrentis Lavrentiadis, has vigorously denied allegations that he used the bank to loan himself and associates hundreds of millions of euros.

Andreas Vgenopoulos, former chairman of Marfin Popular Bank, now renamed Cyprus Popular Bank, has denied conflicts of interest alleged by a Greek parliamentary inquiry and Cypriot lawmakers.

It was Marfin’s largest then Greek subsidiary, the Marfin-Egnatia Bank (MEB), that issued the loans to the Sallas family. According to two audit reports on Marfin, the loans were ranked among its riskiest exposures, judged both by their shortfall in collateral, which is mainly Piraeus shares, and risk of future losses to the bank.

The two audit reports, from January and May this year, were shown to Reuters by separate and unconnected sources. They were authenticated in interviews with banking sources and officials in Greece and Cyprus.

Internal Marfin auditors said executives at MEB had “failed to act in the best interests of the bank” by granting successive loans to Sallas to buy his own bank shares. By 2011 his investment in those shares, the auditors found, had “dire prospects” and had been made through special purpose vehicles and with no personal guarantees.

The auditors wrote: “Worth noting is that loan approval took place at a time when it was all but clear that the outlook for the Greek banking sector and by extension for Piraeus stock was deeply negative.” The loans were issued “when our Bank was already in a precarious liquidity situation”.

SHARE PURCHASES

According to the records, Sallas first obtained a loan agreement from MEB in May 2009. A facility for up to 150 million euros was signed off by the Marfin group’s Vgenopoulos, then executive vice-chairman. A spokesman for Vgenopoulos and Efthymios Bouloutas, the bank’s chief executive at the time, declined to comment on the loans due to “banking secrecy legal obligations.”

By January last year, according to the first audit report, MEB loans to Sallas companies amounted to 48 million euros. But that month, “another 65 million was used” to purchase shares in Piraeus’s 800-million-euro rights issue.

The Sallas family bought their shares via three separate Cyprus-based companies, according to both audit reports. The purchase brought the family’s total loans to 113 million euros, secured on collateral estimated to be worth less than 30 million euros, based on Piraeus’s recent share price.

The three Cyprus-based companies are Shent Enterprises, which is owned by Sallas and which has 45 million euros in outstanding loans to MEB; Benidver Enterprises, which has 22 million in loans; and KAEO Enterprises, which has 46 million in loans.

Records at Cyprus’ corporate registry show that both Benidver and KAEO were owned by Michael Sallas personally until a month before Piraeus’s rights issue.

Ownership was switched to two Greek companies linked to the family and in turn owned by a single Cyprus company called Avecmac, whose shareholders are anonymous. But MEB audit documents from 2012 seen by Reuters record Benidver as owned by Sallas’ daughter Myrto and KAEO as owned by Sallas’ son George.

Avecmac, contacted through its representative in Cyprus, did not respond to requests for comment. Myrto Sallas declined to comment; George Sallas could not be reached.

FAMILY HOLDINGS

Exactly how many shares Sallas and his family bought in Piraeus last January, and in whose name they were registered, is not clear.

Some indication comes from the number of Piraeus shares pledged by the Sallas companies as collateral for the loans. Those rose by 62 million after the rights issue, bringing the total number of Piraeus shares pledged as collateral to more than 66 million, or around 6 percent of ordinary stock in the bank.

In filings to the stock exchange and in other declarations, Sallas has said he owns around 16 million shares in his name, as well as a total of around 16 million purchased through Shent Enterprises. He has declared no share purchases by his children.

Under Greek and European law, any holding in a public company of more than 5 per cent should be announced publicly. Greek law also requires all company executives “and persons closely associated with them” to make all share transactions public.

Marfin’s auditors, according to their report, regard loans to Sallas and his family as “connected.”

But Kostas Botopoulos, chairman of Greece’s Capital Market Commission, which regulates the country’s public companies, said the decision of who to define as a “person closely associated” was “considered on an ad hoc basis.” There is no specific ruling on whether a spouse or children would fall in that category, he said.

Piraeus Bank released a statement saying the bank would not answer the detailed questions sent to Sallas and the bank due to “civil and criminal cases” between Piraeus and Reuters, and between the bank and a former Piraeus employee “charged with serious crimes.” Piraeus has previously said the former employee had defamed the bank.

“The Bank will refute the allegations in court,” the statement said. “To do otherwise would clearly be in contempt of the proceedings. In the interest of transparency, to defend its reputation and reassure its shareholders, the Bank has provided the Bank of Greece with all the relevant information.”

CAPITAL BASE

The loans to investors in the Piraeus rights issue highlight a bigger concern in the Greek banking sector. Piraeus issued more shares last year to strengthen its capital base, enabling it to score higher in European bank stress tests.

The successful issue, Sallas said at the time, showed “a sign of confidence in Piraeus Bank, the Greek banking system and of course the prospects of the Greek economy.”

But Sallas did not make public the loans he and other shareholders had taken out to help make the rights issue a success.

In all, according to loans disclosed so far, nearly one-fifth of the new capital in Piraeus was raised with financing from other Greek banks – including another 20 million euros or so loaned by MEB to investors, and 70 million euros loaned by the Proton Bank. The Proton loans went through offshore companies in tax havens such as the Cayman Islands.

Proton has since been nationalized after Greece’s money-laundering authority alleged fraud and embezzlement in cases unrelated to Piraeus or MEB.

According to several European banking and accounting experts, if banks loan money to finance major stakes in other banks, then the industry’s regulator, in this case the Bank of Greece, should deduct the same amount from the capital the lending bank claims to hold.

Dr Peter Hahn, a fellow at London’s Cass Business School and an adviser to the UK Financial Services Authority, said that a loan scheme whose only means of repayment was shares in another bank should, under international rules, be treated as if the lending bank was directly purchasing shares in the other bank. “The equity in the lending bank would otherwise be supporting risk of loss in both banks,” he said.

Hans-Peter Burghof, a professor of banking and finance at the University of Hohenheim, Germany, said that billions of euros had been given to the Greek banking system without adequate supervision of the sector. “It’s our money and it has been given without controls. It’s a disaster,” he said.

If banks lent to finance each other’s shares, he said, then “this way you can produce as much equity as you like and make banks as big as you like. It is not real equity.” He likened it to “a kind of Ponzi scheme.”

Burghof said that, whether deemed to be covered by regulations or not, if bank equity was raised in this way, the banks and companies involved should be treated as a consolidated whole. “If the regulator finds out (about loans from one bank to finance share purchases in another), he should discount this equity,” he said.

The European Banking Authority, which is meant to safeguard the stability of the financial system and transparency of markets, generally agreed with that analysis, though a spokeswoman said there may be exceptions in the case, say, of a “financial assistance operation”.

There is no indication in their financial statements that either Proton or Marfin made deductions in their capital levels after their loans for Piraeus shares.

In a statement the Bank of Greece said it does not ordinarily require capital deductions from banks that lend money for the purchase of shares in other unconnected banks.

“European Union law does not prohibit granting loans to an entity (person or organization) in order to participate in a share capital increase of another credit institution,” the bank said. Such a deduction from regulatory capital would only take place if a bank granted loans to buy its own shares, it said.

It added that the disclosure of major stakes (over 5%) in a public company was “indeed a requirement on the stakeholder”. But this was policed by the Capital Market Commission, not the Bank of Greece.

The CMC said that shareholders, in calculating whether they hold 5% or more, should aggregate holdings if they have an agreement to act together.

(Edited by Richard Woods, Simon Robinson and Mike Williams)

Critical Thinking and Freedom of Speech is not one of the goals of SEFA

With the occasion of having Mr. Mario Draghi, president of the European Central Bank, participating in the “Room for Discussion” event, the Student Association for Economics and Business (SEFA) of University of Amsterdam avoided any opportunity to expose tomorrow’s economists to critical and diverse thinking. Mr Draghi gave a rather boring and foreseen speech about his views on the role of the monetary policies of the ECB in preventing the economic down spiral of the euro zone crisis. The intelligent, inspiring, and true to the academic spirit, questions chosen for Mr. Draghi by SEFA where non other than “your signature on the euro bill is simple compared to your predecessors, are you also so direct in your life?”, “who was your favorite student?”, and finally “what is your advice for the students that want to also become the president of ECB one day?”.

When we confronted the organizers and ask them why there were no questions about the crisis, or the effectiveness of the policies of the ECB, or finally the consequences of such policies, we were told that students already knew the answers to these questions and thus there was no point posing them. In addition, according to the views of SEFA and the organizers of the “Room for Discussion” event, when you interview important people, such as Mr. Draghi, you should make small talk and not direct questions!

Not even one of the questions we sent beforehand via twitter – which was the designated way to ask questions – was chosen. We had prepared for this case by printing a brochure criticizing the infamous quota of Mr.Draghi, that “the euro must be saved whatever it takes”. However, we were not allowed to distribute our brochure to the students since it was deemed by the security of the University of Amsterdam as non-academic material! We were bullied out by the security, who claimed that the building is private and “owned” by the head of the security. Eventually, we were only allowed to distribute our brochure far away from the entrance of the University.

The policies of ECB have triggered countless criticism not only for causing hundreds of thousands to be unemployed and poor, but also for their effectiveness in the economical growth. Mr. M.Draghi, once a vice chairman and managing director of Goldman Sachs, now the President of ECB, is still a member of private financial trusts and banking lobbies, such as the G30. (For the history, a complaint to the Corporate Europe Observatory (CEO) filed in June 2012, the complaint was directed against the President of the European Central Bank, Mario Draghi, for his membership of an organization of high profile bankers from both the private and public sector – the Group of Thirty G30).

We believe that SEFA, and the University of Amsterdam, has a responsibility in the stultification of the students by exposing them only to one-sided views, and by discouraging lively discussions in interesting topics of the economical and political life. SEFA is also responsible for the degradation of the academic spirit of the students, transforming them to mere admirers of the so called powerful and successful men.

Yesterday, it was clear that there was No “Room for discussion”.

The organizers choose to hide the fact that Mr. Draghi of the ECB is responsible for the humanitarian crisis of the European south. We call SEFA and the University of Amsterdam to organize real discussions that give food for thought, that speak the truth rather than covering up reality, and to stimulate the critical thinking of tomorrow’s economists, so as to be able to recognize and serve society’s interests and not just their carriers with “whatever it takes”.

This is the flyer that was distributed to the attendants of the event:

reinform.nl

This is the reply we got from Room for Discussion:

Dear Sir/Madam,

Bob Verhagen

| Roetersstraat 11 | 1018 WB | Amsterdam roomfordiscussion@sefa.nl | www.roomfordiscussion.com
+31 (0) 20 525 40 24

Repost from  FT Alphaville

Raise your hand if you didn’t first hear about the way in which the Dutch government took over ailing SNS Reaal on February 1st and think ‘oh, really now?’ along with an arched eyebrow.

The mechanics of the takeover are interesting indeed, but given that two of the four largest Dutch banks have been nationalised, we have a bigger picture question:

How much warning was there that SNS Reaal was on the brink?

Surely there would have been some worrying results in the European Banking Authority’s Capital Exercise from last autumn.

Umm, no, actually. (Probably saw that coming, didn’t you?)

SNS Bank reported 13.0 per cent Tier 1 capital as a percentage of risk-weighted assets as of June 2012. For comparison, ING had 13.4 per cent, Rabobank 16.9 per cent, and government-owned ABN Amro 12.5 per cent.

To back up a step, SNS was on the receiving end of €750m of aid in 2008. It hadn’t paid that back, so the government was still rather involved with the group, or at least one would hope so. As the Finance Minister Dijsselbloem outlined in the announcement of the nationalisation, the Dutch central bank (DNB) totally insisted on the formulation of plans. Like, for reals.

Plans are important, particularly when a bank has an underperforming real estate portfolio of some €8.55bn (without provisions) that constitutes a large amount of its total assets (€82.3bn balance sheet). And also it happens to be the fourth largest bank, third largest life insurer, and fifth largest non-life insurance company in the country while having 6,700 employees.

Right, the plan! We were talking about the plan! From 2008 (quoting from the finance minister’s letter on the nationalisation, emphasis ours):

DNB [the Dutch Central Bank] – in order to speed up the phasing-out effort initiated by SNS Bank – requested the firm to draw up exit plans for the international real estate portfolio showing how, when and at what loss this portfolio could be phased out.

Then there was some finger tapping. Then things got more serious:

In mid-2011, DNB repeated its request, this time regarding the phasing-out of the entire real estate portfolio. In 2011, DNB also asked SNS REAAL to formulate an action plan regarding the planned repayment of the government aid and the vulnerabilities identified.

Ja, doe maar! Get on with it already.

When this proved inadequate, DNB requested an additional action plan.

And then finally…

In December 2011, when it became plausible that the problems could not be fully resolved through private means, DNB and the Ministry of Finance set up a joint project group to analyse the possible scenarios and options (private, private-public and public) with regard to SNS REAAL and to set up an emergency safety net should the problems escalate and acute intervention would be required.

***SPOILER ALERT***

The project group failed when talks with banks and then also a private equity fund came to nothing. Those had been going on for quite some time, and once it was clear that an all-private solution wasn’t going to be forthcoming, the government had switched to a strategy of exploring a public-private solution (details of which in the letter).

No joy though. It all came to a head when a deadline given to SNS by the central bank — on January 27th, which is plenty of time when closely monitoring a bank when one lives on a different planet maybe — was missed:

The continuing problems at SNS Property Finance forced DNB to conclude that SNS Bank required twice as much core capital as was available, the capital deficit. DNB had imposed a deadline of 31 January, 18:00 hrs, on SNS Bank to come up with a solution to remedy the funding deficit.

If the government hadn’t stepped in, a bankruptcy was considered inevitable, and they didn’t want to take the risk of causing financial instability by allowing SNS to go under.

Had SNS entered insolvency proceedings, it would have triggered the Netherlands’ Deposit Guarantee Scheme and the costs to that would have to be met by other banks, which the government feared would be too high a burden for them, causing downgrades, increased funding costs, and so on — all of which would ultimately increase the potential burden on the Dutch taxpayer.

Furthermore:

Moreover, recourse to the DGS would imply that over 1 million account holders would temporarily be prevented from using their payment accounts, which might put them in financial difficulty, possibly causing social unrest.

Hup Holland.

But why did it prove impossible to find a solution for SNS that didn’t involve full-up nationalisation? As the finance minister outlined, selling the better bits of the SNS Reaal group wasn’t as feasible as one would perhaps think:

…partly attributable to two problems: a) the double leverage and b) unit-linked insurance policies. Due to these two problems, the separate parts of SNS REAAL would not yield sufficient proceeds to strengthen SNS Bank’s or REAAL’s financial position. As a consequence of the double leverage, a part of the proceeds of the sale would have to be used to pay off loans entered into by the Holding.

That is, the property portfolio was causing the damage to the capital position as it deteriorated, but the double-leverage and unit-linked insurance issues made it impossible to raise money to plug said hole.

To explain “double-leverage” we’ll need a picture:

It’s where the holding company — SNS Reaal in the above — borrows money, and then uses it to buy equity in its subsidiaries, among them SNS Bank and also the insurance subsidiary Reaal. Total double leverage at the end of 2012 for the group was €909m. The consequence of this:

This means that if parts of the insurer are sold off, for instance, not all of the released funds may be used to solve the bank’s problems, because a part has to be used to redeem loans taken out by the holding.

Potverdorie! Shucks.

It’s not unique to SNS either, as per footnote six:

6 Such double leverage structures are often found in bank-insurance conglomerates. The underlying idea is that banks and insurers have strongly different risk profiles, so that pooling and sharing of risks at the holding level can reduce the overall risk level of the bank/insurer conglomerate. However, if both the bank and the insurer run into problems, as in 2008, when hard times hit both banks and insurers, the holding will a double problem to contend with. Since the 2008 crisis, therefore, supervisors and investors have looked askance at double leverage, which they regard as risky and like to see phased out.

As for unit-linked insurance policies, these insured investment products turned out to be overpriced, and banks are having to pay compensation to holders. It’s still uncertain what the final bill will be.

SNS was an accident waiting to happen. If anything, it’s a wonder it took that long.

But let’s finish on a high (foot)note, shall we?

5 According to the latest Overview of Financial Stability published by DNB (autumn 2012), the entire Dutch banking industry holds some €80 billion in domestic commercial real estate exposures. It also holds some €20 billion’s worth of foreign exposures. On a balance sheet total of about €2,200 billion, this adds up to an average exposure of some 4.5% of total assets for the Dutch banking sector. For the other systemic banks, the exposure is, in fact, slightly lower owing to the large size of SNS’s position.

Related links:
Dutch-bottomed bank bondholders – FT Alphaville
Netherlands rescues SNS in €3.7bn bailout - FT

 

http://ftalphaville.ft.com/2013/02/11/1380672/the-netherlands-adds-slow-motion-bank-wrecks-to-list-of-things-its-known-for-right-after-clogs-and-windmills/?

European finance ministers have agreed an £8.7bn bailout for Cypruswhich includes all Cypriot bank customers handing over up to 10% of their savings.

Cyprus becomes the fifth country after Greece, Ireland, Portugal and Spain to turn to the eurozone for financial help amid the region’s debt crisis, but also faces a possible run on its banks as depositors try to avoid losing up to 10% of their savings.

The savers, half of whom are thought to be Russian, will raise almost €6bn. It is the first time a bailout has included such a measure.

“I wish I was not the minister to do this,” the Cypriot finance minister, Michael Sarris, said after 10 hours of late-night talks in which eurozone finance ministers agreed the package. “Much more money could have been lost in a bankruptcy of the banking system or indeed of the country.”

Without a rescue, Cyprus would default and threaten to unravel investor confidence in the eurozone, a renewed confidence fostered by the European Central Bank’s promise last year to do whatever it takes to support the euro.

However, on Cyprus, initial incredulity at the decision gave way to anger. Co-op credit societies, normally open on Saturdays, were shut for business in the coastal city of Larnaca as depositors started queuing early in the morning to withdraw their cash.

“I’m extremely angry. I worked years and years to get it together and now I am losing it on the say-so of the Dutch and the Germans,” said British-Cypriot Andy Georgiou, 54, who returned to Cyprus in mid-2012 with his savings.

“They call Sicily the island of the mafia. It’s not Sicily, it’s Cyprus. This is theft, pure and simple,” said a pensioner.

The bailout was smaller than initially expected and is mainly needed to recapitalise Cypriot banks hit by sovereign debt restructuring in Greece.

Cypriots with savings of under €100,000 will pay a one-off levy of 6.75%, which rises to 9.9% for those with larger deposits.

The levy on bank deposits will come into force on Tuesday, after a bank holiday on Monday. Cyprus will take immediate steps to prevent electronic money transfers over the weekend.

“As it is a contribution to the financial stability of Cyprus, it seems just to ask for a contribution of all deposit holders,” the Dutch finance minister, Jeroen Dijsselbloem, who chaired the meeting in Brussels, told reporters.

Such levies break the taboo of hitting bank depositors with losses, but Dijsselbloem said it would not have otherwise been possible to salvage its financial sector, which is around eight times the size of the economy.

“We are not penalising Cyprus … we are dealing with the problems in Cyprus,” Dijsselbloem said, adding that that under the programme, the island’s debt would fall to 100% of economic output by 2020.

In return for emergency loans, Cyprus agreed to increase its corporate tax rate by 2.5 percentage points to 12.5%.

This should boost Cypriot revenues, limiting the size of the loan needed from the eurozone and keep down public debt.

The International Monetary Fund managing director, Christine Lagarde, who attended the meeting, said she backed the deal and would ask the IMF board in Washington to contribute to the bailout.

“We believe the proposal is sustainable for the Cyprus economy,” she said, “The IMF is considering proposing a contribution to the financing of the package … The exact amount is not yet specified.”

Cyprus, with a GDP of barely 0.2% of the EU bloc’s overall output, applied for financial aid last June, but negotiations were stalled by the complexity of the deal and the reluctance of the island’s previous president to sign.

Moscow, which has close ties with Nicosia, is likely to help by extending a €2.5bn loan to Cyprus by five years to 2021 and reducing the interest rate.

Source: http://www.guardian.co.uk/world/2013/mar/16/cyprus-eurozone-bailout-anger

Friday February the 1st the SNS bank was nationalised. When we are continuously told that there is no money and that cuts to public services are necessary it turns out that there is still 3.7 billion euro left to save a bank and its extensive real estate portfolio. For years trees grew to the sky and no building project was too much for SNS. Now tax payers have to pay the bill for the loss of the real estate sector when we have seen none of the profits. Above all this, it is ridiculous that the new CEO will be “earning” more than a half million a year. Nationalisation in this case means the state is subsidising the bank and it will soon be back to the order of the day. The few chairmen and real estate investors who have gotten rich in the past few years will go scot free. The rich…es they have accumulated through the years should be forwarded back. But this is not enough. Nationalisation should also mean that we get control over the bank. This means that unoccupied office space should be converted to affordable housing and student dorms. In Amsterdam alone more than 10 million square meters, 20% of the total, is vacant.

LIKE many Greeks caught in the maelstrom of the economic crisis, my wife and I live a day-to-day existence.

Since the newspaper where I worked for 23 years (my wife for 17) went out of circulation in December of 2011, we have both been unemployed. Neither of us have received a paycheck in 18 months, as our newspaper stopped paying us five months before it closed. With unemployment for journalists at over 30 percent, and the official unemployment rate at 26 percent, our prospects for this year are, shall we say, not terribly favorable.

Our story is typical of many in Greece, though some are much worse off and some have it better. But like an overwhelming number of Greeks who are struggling just to get enough food, to keep their homes warm and to maintain a semblance of normalcy, we are fighting to keep our dignity intact and avoid the depression that is enveloping our country.

We have been lucky in some ways. Our son, like many young people, has left Greece and found work as a software engineer in Scotland, and we are watching as the country loses a generation of highly skilled university graduates. Our parents, though elderly, are healthy and manage to survive on their pension, which has been cut by almost 50 percent in the last two years. They have offered to share what little they have with us — something common in Greece, where traditional family ties often offset ineffective social welfare programs.

In the past 18 months, we have tried to find work in journalism. With a group of former colleagues, we tried to create a start-up digital newspaper. After months of hard — and unpaid — work, our primary investor pulled out just a few days before we were supposed to go online, unwilling to take the risk in such a fragile economy.

We have continuously explored other avenues to find work. My wife has taken up baking to help keep us afloat. We are exploring the possibility of exporting Greek agricultural products.

In an economy where home sales are almost nonexistent, we managed to sell our small country home. Even though we got less than 20 percent of its previous value, we feel lucky because it allows us to survive for a few more months.

We also managed to get a court order that prevents the banks from foreclosing on our mortgage, so our home in Athens is safe until 2015. We are luckier than the people who are forced to live in their cars — their only property after they lost their jobs and the banks took their houses or their landlords refused to extend them any more credit. They park at a different spot every few days and usually rely on the kindness of strangers for bath and toilet facilities, or relieve themselves at public or private gardens, including, occasionally, our own.

We know we are lucky to have a garden. This January, pruning the trees proved to be psychologically beneficial. This time, though, the pruning went a bit deeper, and I found myself hacking at the laurel tree my grandfather planted when I was born, 57 years ago.

Up to now, we were lucky to escape the wood-cutting, wood-burning craze. With the price of heating fuel almost doubling since last year, central heating is mostly turned off. Fireplaces and stoves are pressed into service, even in high-rise condominiums.

Hence the sting in my eyes every evening when many of our neighbors return to their cold homes and Athens is shrouded in a cloud of wood smoke. Government warnings that pollution has exceeded dangerous levels are dismissed with a shrug, or as another ploy to force people to use the heavily taxed heating fuel whose consumption has fallen by as much as 70 percent. Meanwhile, the Forestry Protection Services are fighting a losing battle to prevent deforestation at a scale unseen since the Nazi occupation.

We are certainly luckier than the people flooding the city’s 191 soup kitchens run by the Greek Orthodox Church. Luckier that the nouveau-poor, like the middle-aged man dressed in an Armani suit, a bit threadbare at the elbows and shiny at the seat of the pants, who tries to look inconspicuous waiting in line at the Koumoundourou Square soup kitchen for his daily meal. Luckier than the very respectable woman who walks six kilometers every day to stand in line for two containers of food and then goes back home pretending to cook, not wanting to tell her sick husband that they can’t afford it.

My wife and I sometimes ask ourselves if we are in a state of denial. But we believe that the biggest danger comes from succumbing to depression, and we both struggled to get out of bed during the holidays. But since then we’ve gotten up every day and tried to find some way to get ourselves back on track. We’d be happy to start over, but where to start?

Any new venture requires money, and we have only enough to survive, and credit is impossible to obtain. When we go to bed at night, we realize we have made it through another day. Seven nights, and we’ve made another week. Like the cloud of smoke hovering over the winter sky in Athens, we want desperately to believe the situation is not permanent.

But we can’t be sure. We do know the smoke will dissipate, at the very least, come spring.

Kostas Tsapogas is a former foreign editor of Eleftherotypia.

http://www.nytimes.com/2013/02/15/opinion/global/a-very-greek-depression.html?_r=0