Bank of Greece dismisses troika calculation of banks’ capital needs

Bank of Greece dismisses troika calculation of banks’ capital needs


By Lefteris Yallouros – Athens

The Greek government may have to settle with a statement from troika inspectors that progress is being made in the implementation of its adjustment program instead of a full agreement ahead of next week’s Eurogroup meeting.

Ongoing negotiations between the troika envoys and Greek ministers seemed to be going from bad to worse Tuesday as stumbling blocks appeared on several issues ranging from the capital needs of banks to labor and public administration reforms.

For euro-zone finance ministers to support the release of funds to Greece, a deal must be reached by Sunday. A progress statement by the troika may be enough for Greece to get the go-ahead at the March 10th Eurogroup.

The disbursement of the remaining EUR 10.1 billion in European Financial Stability Facility funds would come later, as the troika would still need to draft an in-depth report of Greece’s progress before the money can be unblocked.

“If there is a positive result of the troika review and if conditionalities are met, there could be a rapid disbursement of funds to Greece,” Klaus Regling, the euro-zone bailout fund chief, said Tuesday.

Mr. Regling also said he expected “no big surprises” from ongoing “stress tests” of the banking systems in the five countries to which the EFSF and ESM programs have lent funds.

Despite Mr. Regling’s optimistic comment, Greek governor Giorgos Provopoulos had another meeting with troika officials which ended in stalemate Tuesday. The two sides failed to reach a deal on the capital needs of Greece’s systemic banks.

The Greek Central Bank estimated the big four Greek lenders need about EUR 6 billion in additional capitals while the troika maintains almost EUR 8.5 billion will be needed. Eurobank and the National Bank of Greece will each require over EUR 2 billion, while the requirements of Piraeus Bank and Alpha will be marginal.

The BoG – which has the sole responsibility of supervising the Greek banking system – will now publish the BlackRock report by the end of the week without troika approval.

The issue is largely political as the troika is thought to be using talks on the capital needs of Greek banks in order to pressure the Greek government to push through structural reforms and be prudent in the use of the primary surplus achieved in 2013.

Furthermore, the capital needs will affect the country’s debt, fiscal deficit and gap for 2014. If they exceed the available money the Hellenic Financial Stability Fund has left to support the banking system (almost EUR 11 billion), Greece will have to refer to the European Stability Mechanism for Funds, which could see Greek banks suffer a bail-in similar to that applied in Cyprus last year.

If the extra capital is just under EUR 10 billion, the Greek government will not be able to count on using the EFSF funds in order to reduce its 2014 funding gap, the exact size of which has yet to be determined.