Greek banks’ bill of health frees bailout funds
Among the challenges facing them are Europe’s highest levels of nonperforming loans, at nearly 50% of total loans
Greece’s biggest banks emerged unscathed after a stress test, giving European policymakers one less issue to worry about as they plan for the end of the nation’s latest bailout in August.
Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank Ergasias survived the test’s adverse scenario, which pitted them against a fresh recession and a collapse in real-estate prices, the European Central Bank said yesterday. The results mean almost €20 billion ($24 billion, Dh88 billion) of funds set aside to shore up the lenders is now free for other purposes.
Talks between Greece and its international creditors are focused on post-bailout monitoring arrangements and possible measures to lighten the country’s crushing debt load. Ideas that have been floated include using funds left over from the €86 billion package agreed in 2015 to buy debt held by the ECB or the International Monetary Fund.
Piraeus Bank, Greece’s largest bank, came through the stress test’s adverse scenario with a common equity Tier 1 capital ratio of 5.9 per cent, above the EU’s legal minimum of 4.5 per cent. Piraeus said in an emailed statement it remained committed to executing a capital-strengthening plan to ensure it continues to remain above the requirements at all times. The other big lenders also kept their CET1 levels above water.
Among the challenges facing Greek banks are Europe’s highest levels of non-performing loans, at nearly 50 per cent of total loans.
The ECB’s supervisory arm ran into a barrage of criticism from Italian banks and policymakers last year when it came out with proposed provisioning deadlines for future non-performing loans.
The supervisor stuck to its guns and issued the guidance in March. Now it’s considering what further action to take, if any, on banks’ existing stock of bad loans.
Greek banks were hit hard as the country lost a quarter of its economic output in 2012 crisis.