BoG asks len­ders to beef up their cap­i­tal

Kathimerini English - - Business & Finance -

Pres­sure on the lo­cal bank­ing sys­tem is in­creas­ing as a mem­o­ran­dum be­tween the Bank of Greece and com­mer­cial len­ders is im­pos­ing a se­ries of tough mea­sures aimed at strength­en­ing the sys­tem.

The sec­tor’s gen­eral con­di­tions, the over­all sit­u­a­tion in the econ­omy and pres­sure from the BoG and Greece’s cred­i­tors for the cre­ation of stronger banks pave the way for the open­ing of a new con­sol­i­da­tion cy­cle.

Last week BoG Gov­er­nor Gior­gos Provopou­los met the heads of the com­mer­cial banks and in­formed them about the mem­o­ran­dum des­tined to of­fer the lo­cal bank­ing sys­tem a cap­i­tal shield. The mem­o­ran­dum pro­vides for all banks to have their main equity cap­i­tal in­dex, known as Core Tier 1, at 10 per­cent from the start of 2012. Core Tier 1 does not in­clude hy­brid funds, but in­cludes the priv­i­leged shares the state has ac­quired, adding up to about 5 bil­lion eu­ros.

Al­ready the av­er­age Core Tier 1 in­dex of the Greek bank­ing sys­tem stands at 10.4 per­cent to­day as a con­sid­er­able num­ber of banks ful­fill this re­quire­ment. How­ever, banks be­low 10 per­cent will have to take ini­tia­tives in or­der to strengthen their cap­i­tal ba­sis in the com­ing months.

The BoG is also work­ing on a strat­egy to ac­cel­er­ate the open­ing of the in­ter­bank mar­ket to lo­cal len­ders, so as to ren­der them in­de­pen­dent from Euro­pean Cen­tral Bank fund­ing.

Y. PAPADOYIANNIS

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