Over the past year, merger activity in the Greek banking sector picked up significantly. The Greek Competition Authority approved concentrations such as Piraeus/ ATE, Alpha/ Emporiki, and Piraeus/ Geniki. Most recently, a merger between the largest Greek bank, NBG, and the third largest Greek bank, Eurobank, was also cleared, after the companies offered to divest Eurobank’s stake in Cardlink. Cardlink was a joint venture with the participation of Eurobank and Alpha (the second largest bank) and it handled credit card transactions between banks and merchants, supplying electronic bank card terminals to the latter. The divestment of Eurobank’s stake in Cardlink opens the door for Cardlink’s competitors to service NBG/ Eurobank after the merger. It also removes concerns about possible collusion between the merged entity and Alpha to coordinate behaviour in the merchant acquiring market.
Following the clearance, NBG and Eurobank began integrating their operations. The NBG/ Eurobank merger was expected to bring economies of scale of EUR 630 million by 2015, without creating abuse of dominance issues. Overall, the raft of banking consolidation in Greece was celebrated as a positive development. It was seen as a process, at the end of which “three large strong banks and a few smaller banks will remain”, according to the Head of the Bank of Greece.
Until last week. At that point, concerns were voiced for the first time that the NBG/ Eurobank merger would form a bank too big relative to Greece’s GDP, possibly leading to Cyprus-like problems. Taking into account these concerns, Greece decided to suspend the merger. Now, NBG and Eurobank will be recapitalised (separately) by the state bank support fund (HFSF), unless they manage to prove that they can raise 10% of the needed capital from the private sector. Both NBG and Eurobank stated that this might not be possible. So, if recapitalisation takes place with 100% HFSF capital, it is the state bank support fund that will control the two banks in the future and thus, re-assess and decide again whether the merger should go forward.
The bottom-line is that in economies facing sovereign debt crises, the clearance of the NCA is not sufficient and a merger can still have many more adventures after that. As the Commission’s spokesperson put it last Friday, one might have to go beyond the application of the “mainstream” merger rules. Έπεται συνέχεια...