ECB raises the bar for Greek lenders
FRANKFURT (Reuters) – The European Central Bank has set the capital threshold that Greek banks must meet in a stress test higher than in earlier eurozone-wide health checks, a source close to the matter said yesterday. That would potentially require them to raise billions of euros in extra capital. The minimum Core Equity Tier 1 level has been set at 9.5 percent in the ECB’s baseline scenario based on a normal outcome and 8 percent in its “adverse” or stress scenario, the source said yesterday. During the 2014 regional stress tests, the CET 1 capital hurdle, which is the purest measure of a bank’s financial strength, was set at 8 percent for the baseline case and at 5.5 percent for the adverse outcome. According to Greek brokers Alpha Finance, every 50 basis points on the minimum CET 1 ratio translates into a 1-billion- euro capital need for Greece’s four largest banks. “I personally believe that there will be pressure [for tough capital requirements],” said Silvia Merler, an economist at the Bruegel think tank. “If there were to be such differences, the boundary between technical and political could get blurry.” The head of the Greek banking association, Louka Katseli, told a German newspaper she did not think that Greek banks would need all of the 25 billion euros set aside for the recapitalization of banks, adding it was possible that private investors would contribute between 5 and 6 billion euros.