Bidness ETC - Greek Bank May Be Under Risk of Nationalization As IMF Payments Near, If Not, Past Deadline

It comes as additional headache after Greece and EU report to being too far in their deal.

The news regarding Greece and the European Union that are still far off from a potential deal is not bad enough, there is another pressing matter for Greece to handle bundling its interest payments to the IMF that are due this month. The Greek government has notified to the IMF that all of the June payments will be bundled up, which means that the IMF and other creditors are not to expect any dues to be paid to them until the end of this month.

This means that a total of around less than $2 billion would have to be paid in bundles. Previously, the payments were due by a series in June 5, June 12, June 16, and June 19. This, in a way, means that it will not result in a technical default since it is allowed under the rules, and it gives an indication that the Greeks are trying to buy time as much as they can to give them advantage in negotiation process.

That is why National Bank of Greece (NYSE:NBG) American Depositary Share (ADS) was down to a low of 3%, trading at $1.41 at the NYSE, once the news broke out. However, it only made progress from bad to worse at this moment, and at a 52 week average, stock price closed down more than 8% at $1.34, ranging between as high as $4.16 to as low as $0.98.

It must be noted for investors that the negotiations are not likely to end by this month. This is expected to drag on for months if not years. A no confidence call, which will trigger new elections, does not guarantee that the new regime will abide its commitment to the IMF’s contract and documents – that raises the serious risk that Greek financial holding company might get nationalized if the ugly situation of a Greek default occurs.

The ‘mysterious’ threat of nationalization, even if many do not realize the situation of it, is already resulting in more deposits being withdrawn and that is wearing the bank down significantly. Data from the European Central Bank shows that Greek deposits fell from 145 billion euros to less than 140 billion euros, compared to over 170 billion euros in late 2014. Many Greek depositors know that the bank will be seized and no chance that their deposits will be made a whole into it. This is really stretching the crisis into dangerous territory.