By LANDON THOMAS Jr.
Published: June 25,
2013
LONDON — Even as
European taxpayers grimace at the escalating cost of bailing out Greece’s
banking system, the banks’ top executives are poised to potentially strike it
rich.
The plan developed by
the Greek government and its international creditors to recapitalize the
country’s banks involves an unusual twist as stock offerings go: the new shares
in the banks will give investors free and potentially lucrative warrants that
will entitle them to buy many more shares in the future at a predetermined
price.
Because many of the
investors who are expected to participate in the stock program are the same
executives who were running the banks at the time of their near collapse,
critics see it as a case of bankers being rewarded despite their management
missteps. And they say the Greek government is forgoing billions of euros in
potential revenue with the way the stock offering is being handled.
“All you are doing is
rewarding bad behavior,” said Peter Dalianes, a financial consultant in Athens
who for years has called for more public scrutiny of banks in Greece. “The
crisis in Greece stemmed from a sudden financial breakdown due to risky
lending, which then spilled over to, and exacerbated, sovereign debt tensions.”
The cash-raising
campaign, which began in late May and concludes next month, is meant to pump as
much as 23 billion euros into Greece’s three biggest banks. With the lure of
the warrants serving as a powerful incentive, Piraeus Bank, National Bank of
Greece and Alpha Bank have already succeeded in raising about 2.9 billion euros
of this amount, thus ensuring that they will not be nationalized.
The rest of the money
will be supplied by European taxpayers, funneled through the Hellenic Financial
Stability Fund, the Greek body overseeing the program.
But financial experts
contend that the inclusion of free warrants will not only reward well-connected
insiders but will also deprive Greece’s government of billions of euros in
public revenue — money that might have been raised if the stock warrants were
auctioned off, rather than simply given away.
“Who is going to pay
for this?” asked Spyros Pagratis, a financial markets specialist at Athens
University of Economics and Business, in a paper criticizing the recapitalization
plan. “The Greek taxpayer, of course.”
“We know the
authorities wanted ownership of the Greek banks to move quickly to the private
sector,” Mr. Pagratis added. “But the sweetener they have used — free warrants
— is very expensive and will result in forgone income for the Greek state.”
For example, Michalis
G. Sallas, the executive chairman of Piraeus, which has recently become
Greece’s largest bank, raised about 11 million euros, or $14.45 million, by
selling his old Piraeus stock. If he puts that money into the new offering,
which he has said in public filings he will do, the stock warrants he receives
for the shares will carry a value of around 2.5 million euros at current market
prices.
If the stock of
Piraeus increases 50 percent from its current low level, this pile of warrants
would increase in value more than five times, reaching 14.8 million euros,
according to research by Pagratis.
Mr. Sallas and Piraeus
declined to comment.
