Lenders’ reliance on ECB funding increases
Greek banks’ reliance on European Central Bank financing increased for the first time in five months in May, the country’s central bank said yesterday.
Greek banks’ reliance on ECB liquidity rose to 97.5 billion euros in May from 86.8 billion in the previous month, according to a Bank of Greece statement.
Greek banks have been hurt by concerns over their holdings of government bonds and speculation the country may have to restructure its debt. Greece is the lowest-rated country in the world by Standard & Poor’s even after receiving a 110billion-euro bailout from the European Union and International Monetary Fund.
Meanwhile, Europe’s top banking watchdog has warned banks to be more realistic about the value of Greek bond holdings, raising the possibility that an industry-wide health check will force them to raise more capital. With only weeks to go before the results of the so-called stress tests, the European Banking Authority (EBA) said yesterday it was closely monitoring the deteriorating situation in Greece and had given banks additional guidance “to address inconsistencies and excessive optimism” on sovereign exposures.
The regulator is putting 91 banks under the spotlight to see if they are strong enough to withstand a twoyear recession. The results are ex- pected to be revealed on July 13.
Greece’s deepening crisis has reignited concern that banks are not taking a big enough ”haircut,” or loss, on their Greek and other peripheral eurozone government bonds.
The parameters for haircuts to banks’ trading book assets had been adjusted to reflect current market values for sovereign risk and banks’ cost of funding, the EBA said in a statement.