Greek banks NBG and Eurobank on Monday said their planned merger has been postponed, causing huge volatility in their share price amid fears they may be nationalized.

National Bank of Greece and Eurobank saw their stock plunge 30 per cent — the maximum drop allowed in a session — earlier in the day.

But NBG ended the session limiting losses to 10 per cent, while Eurobank staged an astonishing rebound to close up 23.3 per cent.

The two lenders announced that the merger process had been "suspended" as they 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.

German magazine Der Spiegel reported late Monday that part of that recapitalization plan could consist of a Cyprus-style seizure of deposits.

But Greek Finance Minister moved quickly to dispel that notion Tuesday, telling local Greek media "deposits are absolutely secure."

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 some 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.