ATHENS: Bank of Greece governor George Provopoulos on Friday deflected criticism for the breakup of ailing state lender ATEBank, noting that the bank was 4.9 billion euros in the red and beyond salvation.
"ATEBank was not viable," Provopoulos told parliament on Friday in response to criticism from the opposition that the state had essentially gifted the bank's sound assets to private rival Piraeus Bank.
"It had chronic structural problems...and despite recurring capital injections from the state, it faced a capital shortage," he said.
Provopoulos noted that the European Central Bank had decided to cut off liquidity funding to ATEBank and that "certain representatives" of Greece's EU-IMF creditors wanted to shut it down altogether.
This would have cost over 5,000 jobs at a time when the country is facing record unemployment, and the state would still have been obliged to find 14 billion euros ($17.2 billion) to compensate depositors and return 6.3 billion euros in funding to the eurozone, the central banker said.
"This would have shaken systemic stability, which we have so far protected at all cost," Provopoulos said.
Founded in 1929, the former Agricultural Bank has a network of nearly 500 branches but is hampered by ailing subsidiaries. It failed Europe-wide stress tests held in 2010 and 2011.
The government last week decided to separate ATEBank into performing and non-performing assets, handing over the sound part to Piraeus Bank to save jobs.
ATEBank's union argues that under the current plan, bailing out the bank will cost over 7.0 billion euros, including 3.8 billion needed for the state to take over the lender's non-performing assets.
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