Greece's FinMin satisfied with bank results, optimistic on recap | Business News

Greece’s FinMin satisfied with bank results, optimistic on recap

31 Oct 2015 | Author: | No comments yet »

ECB reveals capital hole in Greek banks as unpaid loans soar.

Greece’s banks need to raise more than 14 billion euros (10 billion pounds) of extra capital to cover mounting unpaid loans, the European Central Bank said on Saturday as it announced the results of stress tests intended to rehabilitate Greek lenders. The capital hole has emerged chiefly due to the rising number of Greeks unable or unwilling to repay their debt, after a dispute over reforms between the leftist government and international lenders almost saw Greece leave the euro. The four banks – Alpha Bank, Eurobank, NBG and Piraeus Bank – have until 6 November to say how they intend to make up that shortfall, the ECB said. The figure announced today (Oct 31) is the result of an ECB review of Greece’s four main banks following an agreement on the troubled country’s third bailout: 86 billion euros from other eurozone governments in August.

An ECB stress test known as a “comprehensive assessment” identified a capital shortfall of €4.4bn under a best-case scenario and €14.4bn in a worst-case situation. The review is an important step toward ending limits on bank customer withdrawals and transfers that continue to hamper businesses as the Greek economy struggles to recover. The fact, however, that the declared capital hole is smaller than the 25 billion euros earmarked to help banks in the country’s bailout may encourage investors such as hedge funds to buy shares. This will start a recapitalisation process under the economic adjustment programme that must conclude before the end of the year.” Increasing the banks’ capital reserves would “improve the resilience of their balance sheets and their capacity to withstand potential adverse macroeconomic shock”, the central bank added.

Germany’s Deputy Finance Minister Jens Spahn said attracting investors would reduce the support needed from the euro zone’s rescue scheme, the European Stability Mechanism. In August, eurozone finance ministers released €26bn of the €86bn in bailout funds that went to recapitalising Greece’s stricken banking sector and make a debt payment to the ECB. Greece is racing to bail out the banks before year end, when new European bank bailout rules take effect that would require seizing deposits over the 100,000-euro limit on deposit insurance.

But Ramon Quintana, a director general in the ECB’s bank supervision arm, cautioned that Greece’s economy needed to stay on track for the banks to hold steady. “Any deviations from these scenarios means that reality can go beyond what is expected in the exercise,” he told journalists. “This is why it is very important to avoid any deviation from the economic growth expected.” Banks have struggled most amid the months-long stand-off between leftist Prime Minister Alexis Tsipras and his country’s international backers – the International Monetary Fund and European Union. To reach its outcome, however, the ECB counts into the calculation billions of euros of future tax rebates that the Greek government could pay its banks. But Greece’s future and that of its banks remains uncertain, despite the latest checks. (Reporting By John O’Donnell, Francesco Canepa and George Georgiopoulos; Additional reporting by Gernot Heller in Berlin; Editing by Raissa Kasolowsky)

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