29May11

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Greece mulls setting up Spanish-style "bad bank": paper

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Greece is considering setting up a Spanish-style "bad bank" to clean up its lenders' accounts from "toxic" Greek bonds and make them more attractive to potential buyers, a Greek paper reported on Sunday.

A 'bad bank', formed to hold risky assets owned by a state guaranteed bank, could be set up to absorb the risky Greek bonds held by state-controlled lenders slated for privatization, such as the Savings Post Bank, To Vima said.

"With problematic, Spanish savings banks (cajas) as a model, the finance ministry is examining proposals to implement the idea in the country," it said, without citing any sources.

Spain's Bankia, created from the merger of seven cajas, said last month it would create such a unit in a bid to attract investors ahead of a stock market listing.

Greek banks are believed to hold roughly 50 billion euros of Greece's outstanding sovereign bonds. The bonds have lost much of their nominal value in the wake of the Greek debt crisis, while a possible Greek debt restructuring could mean additional losses for the lenders.

[Source: Reuters, Athens, 29May11]

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