Friday

1st Jul 2022

Greek banks have four days to plan €14.4bn capital rise

  • Attica Bank and others need fresh cash to cover themselves. (Photo: Eric Maurice)

Greece's four main banks have until Friday (6 November) to say how they plan to raise €14.4 billion to cover the capital shortfall found by the European Central Bank (ECB).

Meanwhile the Greek government will issue Monday a bill on how to proceed with the banks' recapitalisation.

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The ECB published on Saturday (31 October) the results of the stress tests it conducted on the Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank. It found that they respectively need €4.9 billion, €4.6 billion, €2.7 billion and €2.1 billion in fresh capital as "credential buffer" in case of a new financial crisis.

The review was part of a bank recapitalisation process planned in Greece's third bailout plan signed in August, that should be completed before the end of the year.

The capital needs shown by the review "were primarily driven by the deterioration in the macroeconomic environment in Greece," the ECB said.

The ECB calculated that non-performing loans, that is the loans that are not being repaid by borrowers, now amount to €107 billion.

Banks were also exposed to "lower collateral values and cash flow valuations" as a result of the political uncertainties over bailout talks this year and, to a higher extent, because of capital controls imposed on 29 June.

The €14.4 billion shortfall pointed out by the ECB is lower than the €25 billion earmarked for bank recapitalisation in the bailout programme.

The European Commission said it was "encouraged by these results".

That could reassure foreign investors and encourage them to participate in the recapitalisation programme.

But the role and influence of Alexis Tsipras' government in the process is still unclear.

"The recapitalisation starts today," Greek finance minister Euclid Tsakalotos told parliament on Saturday, as MEPs voted a draft bill on the government plans to manage the process.

The Hellenic Financial Stability Fund, a state-owned body, "will participate in the recapitalisation of the banks with significant funds," the government's text said.

The bill gives the HFSF full voting rights on any shares it would buy from banks in exchange for providing state aid.

"The Fund is called on to have an increased role in the governance of banks, the management of which will be systematically assessed in order to ensure that the funds received from Greek taxpayers are used in the best possible way," the government said.

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The EU Commission has urged Greek authorities to "work hard" on pension and other reforms, amid reports that the next bailout tranche could be delayed.

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Eurozone ministers seek agreement on home foreclosure to unblock a €2bn tranche, with up to €10bn also available for banks.

Europe’s battered economy in moderate recovery

Most EU states will post modest growth in coming years, the Commission predicts. But Greece will continue to struggle, while France, Portugal, and Spain could fall foul of EU rules.

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