CAIRO: In an effort to mitigate risks in the coming period, Greek-based Piraeus Bank agreed to sell Piraeus Egypt to Standard Chartered Bank.
After being subject to the European Union-wide stress tests to see which banks in the Eurozone could cope with a heavy hit to their financial system, Piraeus is devising a set of plans to alleviate weaknesses found in their results.
The bank, which announced in their published test findings that they “met the capital benchmark set out for the purpose of the stress test,” said that selling their Egypt unit to Standard Chartered is among these measures.
Meanwhile, in the midst of uncertainty in Egypt’s post-revolution period, experts see the possible acquisition as a risky, yet symbolic move of trust in the Egyptian market.
“It’s a big risk at the moment for Standard Chartered because of all of the political problems going on in Egypt right now,” Monette Doss, senior analyst at Prime Group told Daily News Egypt. “However, I think such an acquisition is a very positive sign for the Egyptian market at this time.”
The bank announced in a separate statement on Friday that they have already submitted a request to the Central Bank of Egypt regarding the Standard Chartered Bank’s acquisition of Piraeus Egypt and is currently awaiting a response.
“Piraeus Bank [has] received an indication of interest from Standard Chartered PLC in respect of the potential acquisition of Piraeus Bank Egypt,” the statement read.
While the acquisition is not yet certain, the bank added that discussions between both parties would be “exploring a wider strategic relationship in the areas of trade finance, payments, and project finance.”
Currently hit by the crisis of debt, Greek, along with several other European banks, are looking for ways to strengthen their capital base in order to cope with the ongoing recession.
Standard Chartered’s procurement of Piraeus Egypt is seen as a measure that could bolster the position of the Greek bank as it seeks to strengthen its balance sheets in light of the financial crisis that has plagued Greece for some time now.
On Friday, the European Union announced they would soon publish the results of critical stress tests on Europe’s troubled banks, which are facing pressures from an escalating debt crisis affecting Italy, Spain, Greece, and Ireland.
The tests, which covered 91 banks over 65 percent of the EU banking institutions and total assets, were conducted in cooperation with the European Systemic Risk Board (ESRB), the European Banking Authority (EBA), the European Commission (EC), the European Central bank (ECB).
In the case of Piraeus Bank, the test also was conducted in collaboration with the Bank of Greece.
The bank announced in their results that they plan to work with the Bank of Greece to devise an “execution plan” that would help them collaborate in order to cope through the current crisis which has hit the nation over the past months.
The bank also said they would take into consideration the Memorandum of Economic and Financial Policy (MEFP) when determining this execution plan.
According to Doss, all regulations applied in Piraeus Egypt are controlled by the Central Bank of Egypt, which sets the Egyptian unit of Piraeus aside from the crisis that has been affecting Banking Institutions based in Greece.
First established in 1975 as a state owned and managed banking institution, Piraeus was privatized in 1991 and is currently one of the largest private sector banks in Greece.
Piraeus Bank Egypt’s share values amount to €103 million, while assets values are €1.38 billion, according to Egynews.net.
As of March 2010, the bank’s overall equity capital amounted to €3,579 million while issue repos, clients’ deposits, and retail bonds were €30,084 million.
