Tests start on sys­temic lenders

Tight timetable en­tails lo­cal banks hav­ing share cap­i­tal in­creases com­pleted by year-end to pre­vent bail-in

Kathimerini English - - Front Page - BY EVGENIA TZORTZI

Euro­pean of­fi­cials yesterday be­gan the in­spec­tion that will even­tu­ally de­ter­mine the ex­tent of the re­cap­i­tal­iza­tion re­quired by lo­cal banks, while the timetable is ex­tremely tight, aim­ing to have the en­tire process to boost the lenders’ share cap­i­tal com­pleted well be­fore the end of the year.

In­spec­tors from the Euro­pean Cen­tral Bank and the Euro­pean Sta­bil­ity Mech­a­nism yesterday delved into the files of more than 4,000 cor­po­rate loans and 2,000 mort­gages, as they be­gan prob­ing the loan port­fo­lios of the coun­try’s four sys­temic banks.

The De­cem­ber dead­line is meant to pre­vent the ap­pli­ca­tion of the new bail-in law – i.e. the hair­cut on de­posits of more than 100,000 eu­ros – which will oth­er­wise come into force in Jan­uary 2016. The timetable is so re­stricted that it fore­sees the mon­i­tor­ing of the loan port­fo­lios’ fig­ures up to June 30 run­ning along­side the stress tests that will ex­am­ine banks’ pos­si­ble re­sponses to var­i­ous eco­nomic sce­nar­ios in the next cou­ple of years.

That will bring the start of the stress tests a step closer, with the first data be­ing drawn as soon as mid-Au­gust, so that the re­sults of both pro­ce­dures can be an­nounced by the end of Oc­to­ber. That will leave a pe­riod of two months for the com­ple­tion of the re­cap­i­tal­iza­tion, which could be con­ducted in sum­mary fash­ion at the banks’ gen­eral meet­ings.

Bank man­agers are ex­press­ing con­cern about the size of the cap­i­tal re­quire­ments, with cur­rent es­ti­mates putting the to­tal amount be­tween 10 and 15 bil­lion eu­ros. How­ever, the fi­nal amount will to a great ex­tent de­pend on the macroe­co­nomic sce­nar­ios, which will in­volve


1.0883 eco­nomic con­trac­tions and un­em­ploy­ment lev­els that will de­ter­mine the ca­pac­ity of house­holds and cor­po­ra­tions to meet their loan re­pay­ment obli­ga­tions.

Cor­po­rate loans will come un­der the scru­tiny of the As­set Qual­ity Re­view, with the Euro­pean ex­perts as­sess­ing a broad sam­ple of some 1,000 loans per bank. They will also probe around 500 mort­gage loans per len­der, fac­tor­ing in the drop in prop­erty val­ues.

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