Three ob­sta­cles left on road to com­ple­tion of lenders’ stress tests

Kathimerini English - - Front Page - BY YIAN­NIS PAPADOYIANNIS

The re­sults of the credit sec­tor’s stress tests con­ducted by the Bank of Greece and Black­Rock So­lu­tions are ex­pected by the end of the month, pro­vided ne­go­ti­a­tions with the coun­try’s cred­i­tors on the is­sue are com­pleted.

The new law on the share cap­i­tal in­crease of the sys­temic banks will fol­low, but Fi­nance Min­istry sources tell Kathimerini that there needs to be at least a sense of the level of the funds re­quired be­fore the new frame­work for the cap­i­tal in­creases of the banks is set in stone.

How­ever, ac­cord­ing to all indi­ca­tions, the dis­tance be­tween the gov­ern­ment and its cred­i­tors on the credit sys­tem is large enough to have forced the de­lay to the pub­li­ca­tion of the re­sults, orig­i­nally sched­uled for end-De­cem­ber.

For the com­ple­tion of the stress tests there needs to be agree­ment on three key points. The first con­cerns the thresh­old of the cap­i­tal ad­e­quacy in­dex that Greek banks must reach in or­der to pass the ex­er­cise suc­cess­fully. Greek au­thor­i­ties want the cap­i­tal ad­e­quacy thresh­old at 8 per­cent, as is the Euro­pean Cen­tral Bank’s Core Tier

and the coun­try’s other sys­temic lenders (Al­pha, Na­tional and Eurobank) are still wait­ing for the com­ple­tion of the stress tests con­ducted by the Bank of Greece and Black­Rock So­lu­tions. 1 in­dex thresh­old. Greek banks cur­rently have to reach a 9 per­cent read­ing. Fur­ther­more, in the ad­verse sce­nario of the ex­er­cise, Greece wishes to have a 6 per­cent in­dex thresh­old, the same as for the rest of the eu­ro­zone, against the 7 per­cent level used in the pre­vi­ous Black­Rock stress test.

The sec­ond point con­cerns the han­dling of de­ferred tax as­sets, which the Bank of Greece re­cently ac­knowl­edged in its en­tirety as part of the banks’ as­sets, com­pared with just 20 per­cent up un­til a few days ago. How­ever, many an­a­lysts con­sider the in­cor­po­ra­tion of 100 per­cent of the de­ferred tax as­sets in the stress test re­sults par­tic­u­larly dif­fi­cult due to the Basel III rules, dic­tat­ing that de­ferred tax can­not ex­ceed 10 per­cent of Tier 1 cap­i­tal.

The last point is whether the ba­sic or the neg­a­tive sce­nario will be used to de­ter­mine the cap­i­tal re­quire­ments of banks, as in case that the neg­a­tive sce­nario is cho­sen, it won’t just be Eurobank that may need ad­di­tional funds. It will all boil down to whether the gov­ern­ment is able to tap the 9 bil­lion eu­ros in un­used funds from the re­cap­i­tal­iza­tion process, or if will have to leave it as a safety buf­fer for fu­ture needs.

Newspapers in English

Newspapers from Greece

© PressReader. All rights reserved.