Banks need to strengthen their cap­i­tal bases

Kathimerini English - - Business & Finance - BY YIAN­NIS PAPADOYIANNIS

The Bank of Greece (BoG) is pro­ceed­ing to the re­cap­i­tal­iza­tion of com­mer­cial banks in as­so­ci­a­tion with the coun­try’s cred­i­tors.

In as­so­ci­a­tion with an in­de­pen­dent body, BoG will per­form a study on the qual­ity of the banks’ loan port­fo­lios and the ad­e­quacy of their pro­vi­sions, as well as im­pos­ing an in­crease in the Core Tier 1 ra­tios of ba­sic cap­i­tal by the end of 2012 at the lat­est.

Sources sug­gest that the cen­tral bank will fol­low the Por­tuguese model, whereby banks were asked to raise their Core Tier 1 ra­tio by 10 per­cent be­fore the end of 2012.

Tech­nocrats rep­re­sent­ing Greece’s in­ter­na­tional cred­i­tors, known as the troika, note that it would be best if lo­cal banks drew their re­quired cap­i­tal from share­hold­ers through cap­i­tal in­creases, but if that is not pos­si­ble then they should join the Euro­pean Fi­nan­cial Sta­bil­ity Fa­cil­ity (EFSF).

Bob Traa, a rep­re­sen­ta­tive of the In­ter­na­tional Mon­e­tary Fund in Greece, told a Fi­nan­cial Times bank­ing con­fer­ence in Athens yes­ter­day that Greek banks re­main re­sis­tant to pres­sure but will need to strengthen their cap­i­tal bases.

Af­ter rais­ing their Core Tier 1 ra­tio, lo­cal len­ders will need to im­prove in other ar­eas in or­der to be­come inde- pen­dent of Euro­pean Cen­tral Bank fund­ing by re­gain­ing the trust of the in­ter­bank mar­ket. For­eign­ers be­lieve that banks’ fi­nan­cial re­ports do not por­tray the truth as they con­tain toxic el­e­ments (Greek state bonds), while there are also doubts about the qual­ity of loan port­fo­lios.

Once the BoG study is com­plete, the ex­tent of the ex­po­sure to state bonds will be pub­li­cized so as to re­spond to an­other ma­jor worry of for­eign in­vestors.

Newspapers in English

Newspapers from Greece

© PressReader. All rights reserved.