Daily Management Review

Stress Test On Greek Banks Shows They Will Loose $18.6 Billion Of Capital: ECB


05/06/2018




A stress test conducted by the European Central Bank on the banks of Greece has revealed that in the case of an adverse economic scenario, around 15.5 billion euros ($18.6 billion) of the capital holding or 9 percentage points of total capital of the four biggest banks of Greece would be lost by 2020. These results were published by the ECB on Saturday.
 
The aim of thte health check of the Greece banks were carried out to examine and unearth any form of capital shortage in them prior to the country exiting the 86 billion euro ($106 billion) bailout scheduled for August. This stress test was carried out separately from another stress test that was carried out by the ECB for the other euro zone banks.
 
The outcome of the stress tests conducted on 33 other banks from other euro zone countries will be made public in early November.
 
Piraeus, NBG, Eurobank and Alpha were the four large Greek banks that were picked up for the stress test and this test was done separately and earlier to the rest of the Eurozone banks because the ECB wanted to give enough time to the banks to prepare for any possible shortfall in capital funding before the end of the bailout program.
 
The results of the adverse scenario of the test of the Greek banks show that there would be a drop of 8.56 percentage points to 9.69 percent in the Common Equity Tier 1 ratio (CET1) of Alpha Bank – the bank that fared the best among the four Greek banks.
 
For Eurobank, the drop in the figure has been estimated to be between 8.68 percentage points to 6.75 percent, for the National Bank of Greece it was between 9.56 percentage points to 6.92 percent and for Piraeus Bank it was estimated to be between 8.95 percentage points to 5.90 percent.
 
But because there no predetermined capital threshold was set that would trigger a need to recapitalize, therefore, this 2018 stress test was not a pass or fail exercise for the Greek banks, said the ECB.
 
"Any recapitalisation decision will be taken on a case-by-case basis, after assessing each bank's situation in the light of the results of the stress test and any other relevant supervisory information, following a holistic approach," the ECB said.
 
Ever since the Greek debt crisis engulfed the country’s economy in 2010, it has bene three times that the Greek banks have been recapitalized. Despite those efforts, there is a debt burden of 96 billion euros for the banks there. The banks have pledged to reduce that debt burden by 2019 to an amount of 65 billion euros.
 
This is the fourth stress test for the Greek banks in the last eight years. 25 billion euros into the four banks was first pumped into the banks in 2013 as a part of the first recapitalisation of the banks – led by the euro zone lenders and the IMF. An additional 3.5 billion was raised from private investors.
 
There has been regulatory pressure on the banks to address the bad debt problem. This problem has constricted the capacity of the banks to expand credit and aid in the recovery of the economy.
 
(Source:www.cnbc.com)






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