Of an 86-billion-euro bailout of Greece, 25 billion euros is earmarked for banks.
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If the economy takes a turn for the worse, the banks would have a capital shortfall of up to 14.4 billion euros, the test showed.
“Covering the shortfalls by raising capital would then result in the creation of prudential buffers in the four Greek banks, which will facilitate their capacity to address potential adverse macroeconomic shocks”, the ECB said in the statement, adding that a minimum of euro 4.4 billion, corresponding to the AQR and baseline shortfall, is expected to be covered by private means.
The figure was less than anticipated under recapitalisation plans agreed with Greece’s partners. They had been further hurt by the harm done to the economy and thus to their loans arising from Syriza’s ill-judged attempt to outbluff its official creditors.
Greece’s Alpha Bank, Eurobank, the National Bank of Greece (NBG) and Piraeus Bank were all submitted to a health check by the ECB known as a “comprehensive assessment”.
“The numbers, particularly under the baseline scenario, are satisfactory”, he told Reuters.
Under a “baseline” forecast in which GDP declines by 2.3% this year and by 1.3% in 2016 and then grows by 2.7% in 2017, the four banks will require €4.4 billion.
Much of the focus so far in rehabilitating Greece has focused on the scale of its national debt, which is approaching double its economic output. Today the European Central Bank has published the results.
This bailout stand-off between leftist Prime Minister Alexis Tsipras and his country’s global backers – the worldwide Monetary Fund and European Union – nearly saw Greece tumble out of the euro zone.
It led to the freezing of central-bank funding for Greece’s banks and forced controls on cash withdrawals.
Greece΄s HFSF bank bailout fund will plug any capital gap beyond the baseline scenario if it can not be raised in the market, by buying a mix of new shares and contingent convertible bonds that banks will issue.
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A fall of more than two thirds in the banks’ stock prices this year serves as a reminder of the risks.
