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

Submitted by Tyler Durden
08/21/2011 19:32 -0400
Comments: 72

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,â€