Piraeus Bank is issuing a Eu500m five year covered bond to be primarily placed with the European Investment Bank and other European institutions, in its first external issuance of covered bonds, while National Bank of Greece has made further tweaks to its programme ahead of a potential public deal.

The European Commission announced in conjunction with a signing ceremony today (Friday) that, as part of a package of Eu700m of support for Greek SMEs and mid-caps, Piraeus will in October be issuing the covered bond off its Eu10bn programme. It said the issue, which Credit Suisse worked on, will be primarily placed among the European Investment Bank (EIB), which will take Eu350m, the European Investment Fund (EIF), taking Eu50m, and European Bank for Reconstruction & Development (EBRD) – no further details of the breakdown were released.

With only one benchmark for National Bank of Greece having been issued out of the country, Greek covered bond issuance has predominantly been retained for liquidity purposes, meaning Piraeus’s issue will represent its first externally-placed covered bond.

The Commission noted that it is the first time since the crisis that international financial organisations have invested in Greek covered bonds.

“The significant size of drawn liquidity, long tenor and competitive all-in cost of funding achieved, further highlight the importance of this landmark transaction,” it said.

Proceeds of the mortgage-backed covered bond will be channelled to support SMEs and mid-cap companies by Piraeus.

“Piraeus Bank, the largest bank in Greece, is strategically committed to assume a leading role in restarting the Greek economy by supporting Greek private entrepreneurship,” said Christos Megalou, CEO of Piraeus. “As the largest lender in the business sector, it focuses on the small and medium size enterprises that are the backbone of the Greek economy.”

Nick Tesseyman, EBRD managing director, financial institutions, said the arrangement marks a further important step in the recovery of the Greek banking sector.

“The successful placement will allow Piraeus Bank to diversify its funding sources and strengthen its lending capacity,” he said. “It also demonstrates the growing confidence by institutional investors like the EBRD and sends an important signal to other market participants.

“The rejuvenation of the covered bonds market will benefit the financial sector and the real economy in Greece.”

Greek banks are said to be eyeing a full return to the markets via covered bonds after a landmark sovereign deal in July, with a National Bank of Greece official having told The CBR that it is preparing the ground. This has included rejigging its covered bond programme and yesterday Moody’s noted further amendments had been made.