Greece's four biggest banks would lose 15.5bn euros of capital in stress scenario: ECB

Greek banks recapitalized three times since a debt crisis in 2010, but are still saddled with 96bn euros of soured debt

FILE PHOTO: People are seen in front of a Eurobank branch in Athens, Greece. March 19, 2015. REUTERS/Alkis Konstantinidis/File photo

Greece’s four biggest banks said on Saturday that no new funding plans were needed after stress test results showed they would lose around 15.5 billion euros (Dh68bn) of their capital by 2020 under an adverse economic scenario.

The health check by the European Central Bank, aimed at uncovering any capital shortage before Athens exits its 86bn-euro bailout in August, was carried out separately from a stress test of other euro zone banks.

Test results for 33 lenders from other euro zone countries will be published in early November.

The ECB’s stress test of Greece’s four largest banks - Piraeus, NBG, Eurobank and Alpha - was done early to allow time for any possible capital shortfall to be filled before Athens leaves its bailout.

Among the banks, Alpha Bank performed best as its Common Equity Tier 1 ratio would drop by 8.56 percentage points to 9.69 per cent according the adverse scenario of the test.

It would drop by 8.68 percentage points to 6.75 per cent for Eurobank, 9.56 percentage points to 6.92 per cent for National Bank of Greece and 8.95 percentage points to 5.90 per cent for Piraeus Bank.

According to the ECB, the 2018 health check was not a pass or fail exercise as no predetermined capital threshold was set that would trigger a need to recapitalize.

“Any recapitalisation decision will be taken on a case-by-case basis, after assessing each bank’s situation in the light of the results of the stress test and any other relevant supervisory information, following a holistic approach,” the ECB said.


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After the release of the stress test results, Alpha Bank, National Bank and Eurobank said in separate statements that the input from SSM (Single Supervisory Mechanism) supervisors was that they had no capital shortfall and hence no capital plan was deemed necessary.

Piraeus Bank said it remains focused on executing an existing capital-strengthening plan to ensure that it would stay above applicable capital requirements at all times, while accelerating the de-risking of its balance sheet.

Greek banks have been recapitalized three times since a debt crisis exploded in 2010, but are still burdened by 96bn euros of soured debt. They have committed to targets to reduce that load to 65bn euros by 2019.

May’s exercise was their fourth stress test during the eight-year debt crisis. Their first recapitalisation took place in 2013 when a bank rescue fund, funded by its euro zone lenders and the IMF, pumped 25bn euros into the four banks, while another 3.5bn was raised from private investors.

After another health check in 2014, banks raised 8.3bn euros from private investors on prospects of a recovery. But this proved futile a year later as a new leftist government in Athens clashed with official lenders, sparking a massive flight of deposits which led to capital controls.

Banks were forced to undergo another stress test and recapitalize again in 2015 at beaten down share prices, severely diluting existing shareholders. A total of 12bn euros was pumped into them via rights issues and CoCo bonds.

Banks have been under regulatory pressure to tackle the bad debt problem, which restricts their ability to expand credit and help the economy recover. So-called non-performing exposures (NPEs) are the biggest challenge facing the sector.