Greek bank stocks plunge after merger stalled

ATHENS, Greece Greek banks NBG and Eurobank on Monday saw their stock plunge 30 percent -- the maximum allowed in a day --- after their planned merger was postponed and fears grew they may be nationalized.

National Bank of Greece and Eurobank announced that the merger process had been "suspended" as the two banks have to first raise money in a nation-wide program meant to strengthen the country's financial system. Both have said they are unable to raise the cash, suggesting they may face nationalization.

NBG needs 9.76 billion euros ($12.63 billion) and Eurobank needs 5.84 billion euros ($7.56 billion) in total to meet solvency criteria set by the central bank.

Since the banks cannot raise any of the money themselves, the Hellenic Financial Stability Fund, Greece's bailout facility for the banks, will have to provide it for them. In that event, the fund would essentially take control of the banks, a prospect that has spooked shareholders.

"The Hellenic Financial Stability Fund has stepped in and will decide after the end of this month what will happen with the merger of the two banks," government spokesman Simos Kedikoglou told private Antenna television.

The drop in the banks' stock caused the main Greek stock index in Athens to trade 1.8 percent lower, with banking shares sliding an average of 12.5 percent.

The governing boards of the NBG and Eurobank were to hold meetings Tuesday.