Queues outside the Deposits and Loans Fund in Athens. | EPA Greek banks running out of time But in the eurozone, ‘immediately’ is in the eye of the beholder.

The patience of the European Central Bank is running thin.

It has kept Greek banks afloat for the past six months thanks to its “emergency liquidity assistance” facility (ELA), but the feeling in Frankfurt is that’s enough.

The ECB wants the serious repairs needed by the country’s financial system to be undertaken now. The Greek banks need a massive injection of capital, the sooner the better.

But that may not be possible as quickly as the ECB would like. And barring a fast injection of capital, the ECB will find it hard to argue it is not, in fact, directly funding the near-bankrupt Greek government — precisely the financing banned by the monetary union’s founding treaty.

How the issue is decided will determine the credibility of Greece’s third bailout.

Christian Noyer, head of France’s central bank, said last week that he wanted the Greek banks to be recapitalized as soon as this summer, echoing the prevailing view in the ECB’s governing council.

It’s easy to see why central bankers are in a hurry. The ECB can only fund banks through ELA if they are considered solvent. Greece’s four major banks may have been deemed so last year, but it's unlikely they are today.

The fast deterioration of the country’s economy has eroded the quality of their assets. The proportion of bad loans on their books has shot up as businesses have gone under or struggle to survive.

At the same time, depositors have fled, and the capital controls in place since early July are no incentive to bring money home.

Jens Weidmann, head of Germany’s Bundesbank and member of the ECB’s governing council, has said the ELA raises “serious monetary financing concerns.”

Nevertheless, the ECB raised its ELA ceiling for Greek banks after Athens’ deal with creditors mid-July.

Shoring up the banks would make them stronger, reinforce their customers’ confidence and allow them to resume lending to the economy.

That’s the theory and the creditors’ hope.

Up to €25 billion of the upcoming Greek bailout has been earmarked for recapitalization. That includes €10 billion that should be immediately available through the European Stability Mechanism, the eurozone bailout fund.

But in the eurozone, “immediately” is in the eye of the beholder.

To begin with, no money can be paid out unless there is an agreement on the whole bailout program. Yet negotiations between Greece and its creditors on the so-called memorandum of understanding have barely begun. It will be hard for the parties to come to an agreement by August 11.

Participation of the International Monetary Fund in the new bailout remains uncertain. It’s also unclear whether Greece’s creditors are ready to start talking about debt relief as soon as this summer.

Furthermore, as noted by Silvia Merler, an affiliate fellow at Bruegel, a Brussels-based think tank, shoring up the Greek banks cannot take place before the eurozone’s banking supervisor has assessed their capital needs, which will take some time by itself.

But “waiting until the end of the year would be too long,” she says.

In theory, the banks should be submitted to full-blown “stress tests” by European authorities, but that would take longer still.

That’s why Noyer suggests an emergency recapitalization effort.

Supposing the first hurdles are overcome, the last tricky question is what instrument the eurozone will use to recapitalize the banks.

It should be done through a yet-unused ESM tool called the “direct recapitalization instrument,” which allows the eurozone bailout fund to become the direct shareholder of the banks it rescues.

But the ESM’s own rules create a problem.

The ESM can only step in after banks have been “bailed in,” meaning after creditors and depositors have been called to contribute to the rescue, with their bonds or part of their cash converted into shares.

Bondholders are ranked depending on their level of security. Depositors can be hit if the contribution of creditors isn’t enough to cover the shortfall. Only depositors with funds above the €100,000 guarantee limit [the eurozone standard] would be affected.

Strictly applying the ESM rule would mean uninsured depositors would get a 12-to-39 percent haircut of their money in the four major Greek banks — Alpha, Piraeus, Eurobank and NBG, Merler wrote in a recent paper.

More worrying, since a big chunk of uninsured deposits are held by small and medium businesses, the risk is that the bail-in “would destroy (Greece's) productive potential” at the worst possible economic moment, Noyer warned.

It appears the best way to recapitalize the banks will be for the ESM to act indirectly, lending money to the Greek government through an existing Hellenic Financial Stability Fund, created for Greece’s first bailout in 2010.

Financed by previous eurozone bailout money, the HFSF already owns 55 percent of the capital of the four Greek banks.

However, using the HFSF would require creditors to agree on the general financial architecture of the bailout of up to €86 billion. And on this they remain divided.

Ironically, the HFSF last year returned some €10 billion in bailout money. It was thought, at the time, the banks wouldn’t need it because the Greek economy was recovering.

Six months on, that €10 billion looks like seed money in a recapitalization effort that could need more than double that sum.

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