ATHENS (REUTERS) - Greece's international lenders have asked Athens to halt the merger of National Bank (NBG) with Eurobank, worried that the resulting lender would be too big for the state to deal with, daily Kathimerini reported on Saturday.

The paper said the European Union, European Central Bank and International Monetary Fund troika raised issues over the size of the merged entity relative to Greece's gross domestic product (GDP) and the banking sector as a whole.

NBG took over 84.3 per cent of Eurobank last month via a share swop as part of consolidation in Greece's banking industry to cope with fallout from the debt crisis and a deep recession. The two banks have already initiated merger procedures.

"NBG is going ahead with the legal merger process to absorb Eurobank, which has been approved by Greek and European authorities. Our goal is to complete the process by June," an NBG official told Reuters, declining to comment on the report.

The combined group would have assets of 170 billion euros (S$270 billion), almost the size of the country's 190 billion GDP and 36 per cent of total deposits.

"The troika is arguing that the two banks must be recapitalised separately and remain separate legal entities," Kathimerini said. "The request of the troika that the merger be cancelled is a red line for the government as the tie up is now on its final stretch."

The two banks together need 15.6 billion euros in fresh capital to shore up their solvency ratios to levels required by the central bank after incurring losses from a sovereign debt writedown and impaired loans.

According to the paper, troika officials argue that the combined entity will find it hard to raise a minimum 10 per cent of the needed capital from the private sector to stay privately run, as required under the agreed recapitalisation scheme. Such an outcome will bring the group under the full control of a state bank support fund, which will have a harder time finding a buyer for a bank of this size in the future.