ECB raises the bar for Greek lenders

Kathimerini English - - Focus -

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.

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