Banks op­ti­mistic on stress tests

Talks with SSM point to man­age­able cap­i­tal re­quire­ments, but cap­i­tal ad­e­quacy level may be set high

Kathimerini English - - Focus - BY YIAN­NIS PAPADOYIANNIS

Fol­low­ing talks with Euro­pean Cen­tral Bank of­fi­cials in Frank­furt, Greek banks are qui­etly op­ti­mistic that their cap­i­tal re­quire­ments will be man­age­able. The fi­nal level of those needs will be de­ter­mined next week, once the pa­ram­e­ters and the tech­ni­cal meth­ods of the stress tests are set.

Se­nior of­fi­cials from the Sin­gle Su­per­vi­sory Mech­a­nism of the ECB held a meet­ing with lo­cal bank man­agers yesterday re­gard­ing the progress of the stress tests, but with­out go­ing into de­tails and spe­cific fig­ures. Cru­cially, dis­cus­sions fo­cused on a num­ber of tech­ni­cal as­pects of the ex­er­cise, al­low­ing Greek banks to form a pre­lim­i­nary im­pres­sion con­cern­ing the course of the test. The gen­eral sense is that the fig­ures will not be un­man­age­able, al­low­ing for some re­served op­ti­mism among bank man­agers.

An­a­lysts note that the cur­rent as­sess­ment is tak­ing place in a much more ad­verse en­vi­ron­ment than that of 2014, as the es­ti­mate of the Euro­pean in­sti­tu­tions is for a 2.3 per­cent eco­nomic con­trac­tion this year and 1.3 per­cent next year be­fore a 2.7 per­cent re­bound in 2017. The neg­a­tive course of the econ­omy, which is the base­line sce­nario, ag­gra­vates the sit- ua­tion in non­per­form­ing loans in banks’ port­fo­lios, re­sult­ing in the higher cap­i­tal needs.

The an­a­lysts es­ti­mate that the fi­nal amount that pri­vate in­vestors will be asked to cover will mainly de­pend on the out­come of the as­set qual­ity re­view (AQR) of loan port­fo­lios, which was com­pleted last month, and on the min­i­mum level of cap­i­tal ad­e­quacy a bank will need to pass the test. On this front the news is not good for


1.1439 Greek banks, as the ECB ap­pears to be ex­am­in­ing set­ting a Core Tier 1 ra­tio be­tween 9.5 and 10.5 per­cent for the base­line sce­nario and 8 per­cent for the ad­verse sce­nario.

In any case, the banks’ re­cap­i­tal­iza­tion pro­ject is en­ter­ing its fi­nal stage, and on Tues­day, Oc­to­ber 20, the gov­ern­ment is ex­pected to present the new draft law on the re­cap process, as the timetable is very tight.

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