Assuming there are no complete breakdowns or abrupt U-turns among Greek and/or German lawmakers, it appears as though formal discussions on the new Greek bailout package will commence and, in all likelihood, the country will enter a new €86 billion program.
A large portion of the funding will come from the ESM - Europe’s rescue fund. On Tuesday, the ESM sold €2 billion worth of bonds via its dealer group. Nothing too notable about that.
What is notable however, is that one of the 39 dealer banks refused to participate. That bank was none other than National Bank of Greece. Here’s Reuters [7]:
National Bank of Greece declined to buy bonds from the euro zone's bailout fund in a sale on Tuesday because of Greece's capital controls, bankers said, a sign of the country's financial isolation.
NBG is one of 39 dealer banks the European Stability Mechanism routinely uses to help distribute its bonds.
The banks, called the Market Group, underwrite the bonds and sell them on to investors in a process known as syndication. Banks earn a flat fee plus any margin they make in the process.
Sources at two dealer banks said that NBG declined when it was asked in an online chat forum to take part in Tuesday's bond sale, citing the capital controls.
The bankers said it was very rare for dealer banks to decline an offer to participate.
Presumably what’s happened here is that because Greek depositors can’t buy bonds [8] due to capital controls, National Bank of Greece would end up having to inventory its allotment of ESM paper, as there would be no one to sell it to.
We're not sure what is more hilariously ironic, the fact that Greek banks are refusing to help fund the bailout mechanism that will be used for their own recapitalization, or the possibility that the capital controls effectively imposed on Greece by creditors are making it harder to raise funds for the bailout.
