Document Type

Case Study

Case Series

Resolution and Restructuring

JEL Codes

G01, G29


In 2015, Greece began the open-bank recapitalization of Piraeus Bank (the Bank), which continued over an extended period. Concurrently, Greek authorities and Piraeus Bank formulated a restructuring plan. The restructuring and recapitalization of Piraeus Bank used funds that the European Stability Mechanism provided as part of the country’s third economic adjustment program since its sovereign debt crisis began in 2010. In October 2015, a supervisory asset quality review and stress test identified a capital shortfall of EUR 4.66 billion at Piraeus Bank due to Greek sovereign debt and other troubled credit exposures. The following month, the Bank raised EUR 1.94 billion from private investors to cover the capital needs under the baseline scenario of the stress test. About one-third of that capital came from the conversion of contingent convertible bonds into ordinary shares in what the Bank called a liability management exercise. By December 1, 2015, the European institutions—the European Commission, European Central Bank, and European Stability Mechanism—had all approved a Greek plan to further recapitalize and restructure Piraeus Bank, taking into account the capital Piraeus had raised privately. The Hellenic Financial Stability Fund (HFSF) then injected EUR 2.72 billion in capital to cover the Bank’s additional capital needs under the adverse scenario of the stress test, funded by a loan from the European Stability Mechanism. Additional restructuring included cleanup of nonperforming loans, integration of several other resolved Greek banks, reducing operating expenses, increasing net interest income, making risk management more efficient, and downsizing international operations through the sale of noncore assets outside Greece. At the end of 2022, the HFSF still owned 27% of Piraeus Bank, with a book value of EUR 1.8 billion. The Greek government still owed the ESM EUR 2.72 billion.