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Greece Avoids Bank Run By Last Minute Bail Out Of Proton Bank

Tyler Durden's picture


Alas, it is not a liquidity problem, it is a solvency problem. After delaying this realization for over two years, Greece, and Europe, are about to understand just how flawed "bailout" strategies that address the symptoms and not the cause, have been since the beginning of 2010. And while the world is engaged with the latest victim of the Bernanke-inspired, food-price inflation political upheaval better known as the Arab Spring, whose final stop is nothing less than Times Square, Greece quietly avoided the failure of smallish Proton bank (there is no FDIC backstop of failed banks in Greece), which would have resulted in a market wide panic, and a terminal bank run that would have toppled the Greek financial sector. Luckily, this was prevented in the last second courtesy of a capital injection in the last minute by the big 4 Greek banks. From the FT: "Greece’s four largest banks agreed to take up a €50m convertible bond to help recapitalise Proton Bank, a small lender, the central bank announced this weekend, in what is being seen as an attempt to avert a run on the country’s fragile banking system...“In this environment, it was essential to prevent Proton from collapsing and creating a mood of fear with unpredictable consequences,” said one banker, explaining the rationale for the take-up of the Proton bond." In summary, Greece was lucky... this time around, they had enough cash to save the smallish lender. The next time around they will not be so lucky.

Greek banks no longer have sufficient high-quality collateral to seek funding from the European Central Bank after recent sovereign downgrades. But they are eligible for liquidity allocated by the Bank of Greece in agreement with the Frankfurt-based ECB and are expected to seek it this week.


All four big lenders – National Bank of Greece, Alpha Bank, EFG Eurobank and Piraeus Bank – face a looming liquidity crunch as about €10bn of government deposits are set to be withdrawn from local banks to pay off debt maturing in the next few weeks.


“In this environment, it was essential to prevent Proton from collapsing and creating a mood of fear with unpredictable consequences,” said one banker, explaining the rationale for the take-up of the Proton bond.


Proton, which has just 31 branches, has emerged as the first Greek bank to reach the brink of collapse since the country’s sovereign debt crisis erupted 18 months ago. “It is the small banks like Proton that are most at risk . . . they have been hit by irregular practices as well as the credit crunch,” a Greek financial expert said.


The central bank this month replaced Proton’s board of directors and senior managers, and appointed a special commissioner to oversee operations after discovering a €51m hole in the bank’s balance sheet.


The government also made a €100m emergency transfer to Proton. The bank was however unable to pay back €70m of this amount, after depositors removed funds amid reports that Lavrentis Lavrentiadis, its largest shareholder, was being investigated for alleged embezzlement and money-laundering.

Also it appears that the recent substitution of Greek FinMin G-Pap with Venizelos will not be successful as there, unlike here, bailing out banks at any and all costs s generally frowned up.

Evangelos Venizelos, the finance minister, has faced criticism from opposition politicians for approving the €100m transfer to Proton in defiance of a law banning the government from depositing funds with banks that face financial problems.

For now it appears that contrary to some expectations of a new ECB announcement tonight, which would provide so much needed USD-denominated liquidity to local banks, one is not coming, which means that the same old Risk Off scramble will prevail as soon as Europe opens in a few hours. And one of these days the Greek bank that blows up will be just large enough to where even its bigger cousins will be unable to bail it out.

h/t Mike


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Sun, 08/21/2011 - 19:35 | 1584350 Irish66
Irish66's picture

Too small too fail

Sun, 08/21/2011 - 19:40 | 1584360 wang (not verified)
wang's picture

indeed, Protons are quite small

Me, I bank at Amoeba bank



Sun, 08/21/2011 - 19:43 | 1584379 WestVillageIdiot
WestVillageIdiot's picture

It would seem that the only banks that are still solvent, and having no liquidity problems, are the Sperm Banks. 

Sun, 08/21/2011 - 19:49 | 1584402 WmMcK
WmMcK's picture

I only overdrawn at the blood bank.

Sun, 08/21/2011 - 19:59 | 1584423 Arrowhead
Arrowhead's picture

sperm banks are a racket, depositors should deal direct

Sun, 08/21/2011 - 21:42 | 1584667 Tijuana Donkey Show
Tijuana Donkey Show's picture

I always withdraw from the assets before an unwanted deposit.....

Sun, 08/21/2011 - 20:10 | 1584451 Mae Kadoodie
Mae Kadoodie's picture

Lt. Sulu, arm the Proton torpedos!

Sun, 08/21/2011 - 21:42 | 1584668 Calmyourself
Calmyourself's picture

If I remember Lt. Sulu was arming the sperm torpoedoes


Sun, 08/21/2011 - 20:12 | 1584455 Cassandra Syndrome
Cassandra Syndrome's picture

CERN Relief Program Bitchez

Sun, 08/21/2011 - 20:16 | 1584464 WmMcK
WmMcK's picture

Accelerating, for sure.

Sun, 08/21/2011 - 20:14 | 1584457 WmMcK
WmMcK's picture

"Proton Bank", I thought it was "Photon bank".  Catch the wave.

Sun, 08/21/2011 - 22:55 | 1584871 IQ 145
IQ 145's picture

I'm waiting for the bailout of the neutron bank.

Sun, 08/21/2011 - 20:54 | 1584546 IMA5U
IMA5U's picture

that's what she said

Sun, 08/21/2011 - 20:33 | 1584357 johngaltfla
johngaltfla's picture

LOL, and that's like putting more cash into an ATM on the Titanic.

Sun, 08/21/2011 - 19:38 | 1584358 Newsboy
Newsboy's picture

Mission Accomplished!

Sun, 08/21/2011 - 22:39 | 1584821 Thomas
Thomas's picture

Helluva job, Brownie.

Sun, 08/21/2011 - 19:46 | 1584361 sitenine
sitenine's picture

Greek banks trying to prevent a mood of fear.  No one could possibly see any irony in that.  /sarc

Sun, 08/21/2011 - 19:42 | 1584369 WestVillageIdiot
WestVillageIdiot's picture

There's going to be a revolution at Times Square tomorrow?  Cool.  I guess I will get out of the subway in the morning and check it out.  It couldn't happen in a more disgusting place.  Maybe they can set up the guillotines in that empty space where ESPN Zone used to be. 

Sun, 08/21/2011 - 21:07 | 1584586 zen0
zen0's picture

There is an opportunity for political performance art here.Guillotines set up at strategic spots suggesting a reckoning for the kleptocracy.


Where are the artists when you need them?

Sun, 08/21/2011 - 22:57 | 1584875 IQ 145
IQ 145's picture

"it couldn't happen in a more disgusting place"; oh yeah; what about Brooklyn ? eh. Did you think of that?

Sun, 08/21/2011 - 19:42 | 1584370 WmMcK
WmMcK's picture

+ (Postive) hadrons.

Sun, 08/21/2011 - 19:46 | 1584392 navy62802
navy62802's picture


Sun, 08/21/2011 - 19:43 | 1584376 disabledvet
disabledvet's picture

Exactly. No swap lines.methinks it'll be official soon: "the training wheels are off."

Sun, 08/21/2011 - 19:45 | 1584386 wang (not verified)
wang's picture

and now the looting begins

oh. and those 140 tonnes of gold

promise, we'll search the world to find out where is was taken and prosecute those who stole it

promise justice will be done

Sun, 08/21/2011 - 22:58 | 1584879 IQ 145
IQ 145's picture

"Everyone is crying out for justice; just as soon as they get theirs"----Mose Allison--

Sun, 08/21/2011 - 19:46 | 1584393 Diablo
Diablo's picture

the proton bank bail-out was not caused by the sovereign debt crisis. the eur51mio was embezzelment. 



Sun, 08/21/2011 - 19:47 | 1584395 ISEEIT
ISEEIT's picture

Long EUR. 1.42 is the line in the sand. Below that USD spikes and the game changes.


Sun, 08/21/2011 - 19:48 | 1584399 ISEEIT
ISEEIT's picture

Disclosure: I'm short at 1.42. Holding and covered to the moon.

Sun, 08/21/2011 - 19:54 | 1584412 unum mountaineer
unum mountaineer's picture

just a game thought: recall the fx swap lines from last week.woukd be the ultimate exercise of swap line reach around, snb deniable plausability..things that make you go hmmmm..

Sun, 08/21/2011 - 19:54 | 1584413 monopoly
monopoly's picture

Just the timing, that is all that is not known.

Good article in Bloomberg, if you want to really get pissed off, again.

Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans
Sun, 08/21/2011 - 20:40 | 1584520 SIOP
SIOP's picture

"Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans"


Sun, 08/21/2011 - 19:54 | 1584414 Long-John-Silver
Long-John-Silver's picture

The only Bank run I want to see is in Bullion. All Hail Hugo! Hooray! Hooray! Hooray! 

Sun, 08/21/2011 - 21:02 | 1584572 Snidley Whipsnae
Snidley Whipsnae's picture

One of these seemingly insignificant bank failures is going to be the trigger for chaos...

The central banks don't have enough fingers to plug all the leaking holes

Sun, 08/21/2011 - 21:44 | 1584676 Calmyourself
Calmyourself's picture

Fingers no, electronic currency yes..  This is all going to last longer and be more painful than most think..

Sun, 08/21/2011 - 19:55 | 1584417 JLee2027
JLee2027's picture

Seems to be a constant state of one debt crisis after another. 

The end must be here. They'll give up soon.

Sun, 08/21/2011 - 19:56 | 1584419 prophet
prophet's picture

Epic Frail

Sun, 08/21/2011 - 20:02 | 1584433 NumNutt
NumNutt's picture

Kind of like crack heads lending each other money, they know they will never see it again.

Sun, 08/21/2011 - 20:05 | 1584440 Arrowhead
Arrowhead's picture

By God I'd better see mine, I have some expensive dental work to pay for.

Sun, 08/21/2011 - 20:08 | 1584446 WmMcK
WmMcK's picture

The one case in which I will rid myself of metal -- old amalgam fillings, that is.

Sun, 08/21/2011 - 21:13 | 1584598 Arrowhead
Arrowhead's picture

Is mercury still traded? I remember seeing the price of mercury quoted in the paper in the 1980's when I was pup.

Mon, 08/22/2011 - 10:31 | 1585818 SAJ
SAJ's picture

No, Arrrowhead -- the mercury contract on the old NYMEX (pre-energy) failed not once, but twice.   First time in 1975 or 1976.  Second time, for good, in the late 1980s.

Joined the ranks of Apples, Iced Broilers, Eggs, Maine White Potatoes, Silver Coins, Tom Turkeys, and here recently, Frozen Pork Bellies.  All of these had one thing in common (well, besides failing):  the contracts never met their respective industries' needs.


Sun, 08/21/2011 - 20:29 | 1584491 Lazlo Toth
Lazlo Toth's picture

So.. let me get his straight...

The bigger failing banks in Greece are lending to the smaller failing banks in Greece....

But the bigger banks must be lending the money of the Bank (i.e. Greece citizens who bank there) to the smaller failing bank.

So... Who got done?

Mon, 08/22/2011 - 07:22 | 1585316 Mesquite
Mesquite's picture

Some things never change...

Sun, 08/21/2011 - 20:02 | 1584434 LookingWithAmazement
LookingWithAmazement's picture

So, no bankruns in Greece and further Europe. Bankproblem solved. Boring world we live in.

Sun, 08/21/2011 - 20:04 | 1584439 LawsofPhysics
LawsofPhysics's picture

I know of several venture fund guys heading to Germany tomorrow.  We all know that it is arm-twisting time, just wish I knew who was twisting who's arm.  Although short-lived, I think one fiat (either the dollar or the Euro) is about to get a bump.  Gold will, simply because.

Sun, 08/21/2011 - 20:14 | 1584459 Jasper M
Jasper M's picture

I'l take the under on that trade. 

If When interest rates go up (and Bernanke can't stop them), gold will plummet. 

Sun, 08/21/2011 - 20:24 | 1584476 LawsofPhysics
LawsofPhysics's picture

Ah the contrarian, we can't have money becoming a store of value now can we.  Interest rates goes up, America defaults.  Anything of physical value will be used as "money".  All paper will be good for starting fires.

Sun, 08/21/2011 - 20:31 | 1584499 Dick Fitz
Dick Fitz's picture

Yes, when interest rates rise gold will drop, for a short while. The rise in interest rates will signal even higher inflation, and gold will then resume rising at even faster speeds. A 20% interest rate on a currency that is depreciating (due to price inflation) at 30-99% a year is still a losing deal.

Sun, 08/21/2011 - 21:09 | 1584591 Snidley Whipsnae
Snidley Whipsnae's picture

Jasper... If interest rates of US Ts go up the US Economy is toast... A default on US Ts will ensue for the treasury will not be able to pay the interest on the debt without massive printing... Dollar will sink on news of massive printing...

and PMs will be the only game in town!

Mon, 08/22/2011 - 05:44 | 1585238 falak pema
falak pema's picture

Benocide's rule holds: ZIRP for two more years. Print and dump. "Exorbitant privilege" holds until the Chinese pull the plug on USD as reserve. But that will take some doing. Its real big game changer and could shove the world to the brink of Armageddon.

Dick Cheney said it all : "The American way of life is non negotiable." He was obviously talking in the name of the Oligarchs, not in name of Main Street. Subtle nuance which is now sinking home fast to Main Street USA. But the Chinese have their eyes on what Benocide's print and dump could do to hyperinflation in China and its RM commodity market. It could explode their bubble and deflate world wide growth. 

Pm stays the only game in town. Until the Oligarchs make their move. Watch out. If there is a massive sell off by Paulson...If deflation comes in big way... Two black swans that could kill PMs. But as long as we are in "print and dump" mode and USD stays reserve that devalues every day, PMs stay sexy. The less worse of two scenarios from Ben's perspectve. And he is point man for the Oligarchs.

Sun, 08/21/2011 - 21:48 | 1584687 Calmyourself
Calmyourself's picture

Oh yes absolutely right....MOMENTARILY, then you will be very wrong..

Sun, 08/21/2011 - 20:09 | 1584449 sudzee
sudzee's picture

"The government also made a €100m emergency transfer to Proton. The bank was however unable to pay back €70m of this amount, after depositors removed funds amid reports that Lavrentis Lavrentiadis, its largest shareholder, was being investigated for alleged embezzlement and money-laundering."

And the run on banks continue. Small depositors moving fiat to gold. Won't take much more till " they all fall down".

Sun, 08/21/2011 - 20:16 | 1584450 ThirdCoastSurfer
ThirdCoastSurfer's picture

An accounting fraud scandal of  €51m was plugged with a convertible loan (really?!?! how many shares would you like?)  after €30m of the €100m emergency gov loan could not be repaid. All this while a total of €10bn is set to be withdrawn by the government over the next few weeks when Greece has no FDIC insurance equivalent????  Will the government accept mark-to-model shares in lieu of cash? 

What the hell does confidence mean anyway and where the is Cassandra when you need her? 

Sun, 08/21/2011 - 20:12 | 1584454 flyr1710
flyr1710's picture

what about neutron and electron bank?

Sun, 08/21/2011 - 20:35 | 1584506 grunk
grunk's picture

I used to bank at Electron Bank, but the tellers were too negative. That was a minus for me.

Sun, 08/21/2011 - 21:06 | 1584583 Arrowhead
Arrowhead's picture

That is so corny I think I'll orbit another thread

Sun, 08/21/2011 - 20:15 | 1584460 jonjon831983
jonjon831983's picture

I'nt this one of them pluggin holes in the dam things?  I think they've torn off a few fingers to plug some holes and are using their toes.  I guess 2nd last to plug the holes would be their tongue then... finally their crownjewels.

Sun, 08/21/2011 - 20:15 | 1584462 wombats
wombats's picture

But what about BofA?  Who will bail that one out and when will it happen?

Sun, 08/21/2011 - 21:50 | 1584695 Calmyourself
Calmyourself's picture

Hopefully that one is thrown in a hole with some lime..

Sun, 08/21/2011 - 20:17 | 1584465 Drag Racer
Drag Racer's picture

In his remarks, Venizelos also said that Greece's banking system was "the safest" in Europe, enjoying support from the European Central Bank and other international institutions, which have designed safeguards to ensure the country's fiscal crisis did not turn into a banking crisis.

"All our banks are solvent," Venizelos said in response to criticism from opposition lawmakers who attacked the government's handling of a recent scandal involving Proton Bank SA (PRO.AT), one of Greece's smallest lenders.

A Greek public prosecutor recently charged seven members of Proton's board with embezzlement...

Sun, 08/21/2011 - 21:15 | 1584608 Snidley Whipsnae
Snidley Whipsnae's picture

Safe banks? Where?...

US banks:

  • Bank of America: -34.1% over the past 12 months, -34.51% over the past 6 months, -14.2% over the past month alone.
  • Citigroup: -9.78% YoY, -22.64% over 6 months, -13.22% over the past month.
  • Morgan Stanley: -24.23% YoY, -30.12% over 6 months, -12.33% over one month.
  • Goldman Sachs: -13.95% YoY, -19.93% over 6 months, -3.53% over one month.
  • JPMorgan: -3.21% YoY, -12.54% over 6 months, -4.38% over one month.

Foreign banks:

  • Société Générale: -34.82% YoY, -36.39% over 6 months, -30.28% over one month.
  • Crédit Agricole: -30.9% YoY, -31.66% over 6 months, -30.8% over one month.
  • Deutsche Bank: -31% YoY, -17.61% over 6 months, -16.48% over one month
  • RBS: -35.61% YoY, -25.12% over 6 months, -17.73% over one month

Europe on the Verge of Breaking

  • Bank of America: +7.93% Aug 15, but -22.4% in past month, -34.95% in past 3 months
  • Citigroup: +4.76% Aug 15, but -18.53% in past month, -24.71% in past 3 months
  • Morgan Stanley: +6.10% Aug 15, but -15.03% in past month, -25.74% in past 3 months
  • Goldman Sachs: +2.28% Aug 15, but -8.28% in past month, -15.79% in past 3 months
  • Société Générale: +2.06% Aug 15, but -28.53% in past month, -41.23% in past 3 months


Sun, 08/21/2011 - 20:20 | 1584470 HardlyZero
HardlyZero's picture

So when does the next proton come flying a few attaseconds ?

Crisis averted until the next zillion protons come flying by every few seconds...I feel so mush safer now !, now!!

Sun, 08/21/2011 - 20:25 | 1584480 ginunn
ginunn's picture

Consider: you're a depositor at Proton Bank. You've just learned that your deposits were rescued from oblivion by a European-style financial market intervention. You will:

a) Go to bed and sleep peacefully tonight knowing your money is safe.

b) Grab a sleeping bag and cue up on the sidewalk outside your Proton Bank branch for Monday's opening.

Mon, 08/22/2011 - 01:39 | 1585091 myne
myne's picture

C) Open whatever net-banking platform they have and "bpay" your entire balance to your other (bigger) bank account and go camp at that bank.

Sun, 08/21/2011 - 20:26 | 1584481 Caviar Emptor
Caviar Emptor's picture

New TV Soap Opera starring Ben Bernank: All My Zombies! 

We got zombie US banks, and zombie Euro banks, now even small Greek banks. But don't kid yourself we don't also have : Zombie Wall Street (how long can they go without more QE or bailouts), even Zombie Sovereigns (Greece, Ireland, Portugal, and joining the family: Spain Italy Belgium).  And we'll soon have zombie munis and zombie sates, zombie pension and money market funds, zombie auto makers, zombie political parties, zombie military......fill in your favorite zombie!

Sun, 08/21/2011 - 20:27 | 1584484 chump666
chump666's picture

Greek banking (bank run) crisis?...Yeah, don't think the ECB could plug that.  Probably on the cards next few weeks

Sun, 08/21/2011 - 20:39 | 1584515 zippy_uk
zippy_uk's picture

Greek, Irish, Portugese people - go out an buy this book now:

People from Spain and Italy, you might want to check it out on Amazon, see if its right for you.

People of France, UK and Germany - no book recomendations - YET.

Sun, 08/21/2011 - 20:55 | 1584548 IMA5U
IMA5U's picture


so is the one of many sunday nite/monday morning specials to get the market higher?

merger monday?

euro magic?

fed rumor?

can't wait for that bear market rally!

Sun, 08/21/2011 - 21:00 | 1584563 max2205
max2205's picture

Split a proton and well all hell breaks loose. So 4 bad banks propt up a real bad bank. With what..... It's too late

Sun, 08/21/2011 - 23:27 | 1584930 StychoKiller
StychoKiller's picture

Umm, neutrinos?

Sun, 08/21/2011 - 21:06 | 1584582 zorba THE GREEK
zorba THE GREEK's picture

Propping up failing banks is like young girl stuffing toilet paper in her bra. It only fools the fools.

Sun, 08/21/2011 - 21:19 | 1584615 WonderDawg
WonderDawg's picture

Dude, get with the times. They have padded bras now, no need to stuff them like they did back when I was in school.

Mon, 08/22/2011 - 09:13 | 1585554 falak pema
falak pema's picture

I thought it was the guys these days who stuffed their bathing suits on the beach with their 'hanker-chiefs'.

Sun, 08/21/2011 - 21:09 | 1584592 zen0
zen0's picture

If a run on one small bank can produce a disaster, the disaster has already happened.

Sun, 08/21/2011 - 21:34 | 1584646 Mongrel
Mongrel's picture

Why can't the bank just make up figures for its balance sheet? Seems more prudent than admitting to going broke . . .

Sun, 08/21/2011 - 21:48 | 1584689 Growyourownfood
Growyourownfood's picture

Does anyone have any theories as to why the euro hasn't been imploding over the last 3 weeks? Will it take a bank run for it to revalue? I estimate fair value is currently well below 1:1 vs USD. Any opinions?

Mon, 08/22/2011 - 08:36 | 1585439 Fuh Querada
Fuh Querada's picture

Story in today's Handelsblatt: Greece Stops Paying Pensions to Dead People

Mon, 08/22/2011 - 09:59 | 1585707 MS7
MS7's picture

Headline I want to see: Greece Stops Paying Middle Class and Poor People's Money to Bankers. But that headline has zero chance of happening with the current government. No doubt there were people who lied about taxes and to collect pensions etc, but the same political parties who have controlled Greece for decades and who lied to the EU and everyone else about their finances are still in charge and are now blaming the ordinary folk for the financial disaster. Sorry to be a bit off topic here, but my point is I'd like to see people in government brought to justice and not just the ordinary folks who made mistakes.

Tue, 10/18/2011 - 10:19 | 1784944 mekia
mekia's picture

Shame there is bigger shit going down, as the Proton Bank saga is an epic swindle.


- Greek prosecutors investigated and charged 7 members of the board for embezzlement and violating anti-money laundering laws.

- Proton bought out a private bank (Omega) in 2006 who counted among exectives the father in law of the current minister of finance and the brother of G.Pap.

- Venizelos (finance minister) tabled a bill in Parliament to extend and backdate the amnesty on the actions of Minster of Finance to 1997 (law 3904, gives amnesty to the finance minster for any disbursement of public funds and no accountability if used illegally)

- Why did they rush to nationalize Proton? 


Proton = Ponzi? = clearing house of the PASOK party?


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