Greek banks pass ECB stress tests with flying colors

Greek banks pass ECB stress tests with flying colors


By Lefteris Yallouros – Athens

Following months of speculation on how Greek banks would perform in the European Central Bank’s stress test, the results exceeded even the most optimistic expectations.

All four of the country’s systemic banks have been found having adequate funding, with very few needs for recapitalization.

Eurobank’s capital needs were found at just 1.76 billion euros, based on figures from 2013 (following its share capital increase of 2.86 billion euros and a restructuring plan already submitted). The National Bank of Greece (NBG) was found in need of 930 million euros worth of additional funding. According to the stress tests, Piraeus Bank was borderline around the limit set by ECB with a need of 655.99 million euros worth of additional funding (also based on 2013 figures).

Piraeus will cover its capital needs through the restructuring plan that the bank has submitted and partly implemented already. NBG needs will be covered by the sale of shares in Finansbank, National’s Turkish subsidiary.

Alpha Bank performed most remarkably as it was found with zero funding needs. Alpha has not only passed the stress test with its Core Tier 1 index at 8.1, but it has also found itself among the top 20 percent of the 123 banks across Europe that took part in the exercise of the ECB.

The excellent results give a great boost to the Greek government too as it could potentially us a Hellenic Financial Stability Fund cushion of 11.3 billion euros towards lowering the huge sovereign debt.

Furthermore, lenders will now be expected to finance the real economy and boost healthy businesses in desperate need of liquidity as well as deal with non-performing loans of households and enterprises.

Following the official release of the ECB stress tests results, the Bank of Greece issued a press release, confirming the satisfaction of the Greek banking system. The statement reads:

Three of the four Greek credit institutions that took part in the Comprehensive Assessment have no capital shortfall under the relevant dynamic balance sheet assumption and the fourth bank has practically no shortfall.

Under the static balance sheet assumption, Alpha Bank S.A., has no capital shortfall, while Piraeus Bank S.A. has a capital shortfall that is more than covered by the capital raising performed in 2014 (net of repayment of preference shares). Under the static balance sheet assumption, National Bank of Greece S.A. and Eurobank Ergasias S.A. have a capital shortfall that is not fully covered by the share capital increases performed in 2014. However, as stated in the aggregate report on the Comprehensive Assessment: “[these] banks … will have dynamic balance sheet projections (which have been performed alongside the static balance sheet assessment as restructuring plans were agreed with DG-COMP after 1 January 2014) taken into account by the JSTs in determining their final capital requirements. Under the dynamic balance sheet assumption, one bank (National Bank of Greece S.A.) has no shortfall and one bank (Eurobank Ergasias S.A.) has practically no shortfall”.

The results of this exercise provide confirmation that the capital raising and restructuring plans implemented by the four Greek banks have significantly strengthened their capital positions.