Greece’s Alpha Financial institution, Eurobank, the Nationwide Financial institution of Greece and Piraeus Financial institution have been all submitted to a well being verify by the European Central Bank often known as a “complete evaluation”.
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Despite diverging views on a few issues, all pro-euro parties represented in the 300-member assembly who jointly control 269 seats agreed on the necessity of proceeding with the third bank recapitalisation since the start of the crisis in late 2009, and voted in favor of the draft bill.
More importantly, the results surface as an important milestone for recapitalization of Greek banks. Alpha Bank needs €2.74 billion in fresh capital, while the country’s largest lender NBG requires €4.60 billion.
The exact mix of shares and contingent convertible bonds the HFSF will buy from banks in exchange for providing state aid will be decided by the cabinet.
The European Commission said it was “encouraged by these results”.
New legislation approved by Greek lawmakers on Saturday gives the state-owned Hellenic Financial Stability Fund a more active role in helping lenders get back on their feet, with new powers to evaluate bank boards and veto strategic decisions. Greece is racing to bail out the banks before the end of the year, when new European rules take effect.
The ECB, in its report released Saturday, identified a capital shortfall of 4.4 billion euros under a best-case scenario and 14.4 billion euros in a worst-case situation for the four banks that are now struggling under a pile of swelling bad loans. In such a scenario, consumer and business confidence would drop further in response to restrictions on cash withdrawals from deposits and on cross-border payments.
Two tests had shown combined shortfalls of 4.4 billion euros under a baseline scenario and up to 14.4 billion euros ($15.8 billion) under an adverse scenario, it said.
Greek finance minister Euclid Tsakalotos said that bank recapitalization and a viable solution to non-performing loans will both happen before the end of the year. Now that Greek banks are aware of capital gaps, given economic adversity, the banking sector can focus on reorganizing balance sheets and cementing gaps.
Piraeus reported on Saturday a net loss of €635 million in the first nine months of the year and an accelerating pace in the formation of sour loans. Alpha Bank was also in the red for January to September by €838.4 million versus a year earlier profit of €129.3 million.
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Other problems faced by the sector include restoring liquidity conditions for the domestic banks that have been relying heavily on emergency funding from the ECB. There’s a 75 percent ratio for Tier 2 notes and 30 percent for Tier 1 securities.
