Athens, January 9, 2015/ Independent Balkan News Agency
By Spiros Sideris
Snap election in Greece create political uncertainty, which is credit negative for greek banks, argues Moody’s rating agency.
“The political uncertainty regarding the Greek government and the consequent resurgence of rumors about a possible Greek exit from the Eurozone affects the confidence of depositors and impedes the access of banks to liquidity”, emphasises the rating agency in its report.
As is pointed out by Moody’s, the speculation comes from the fact that in the polls leads the party of the main opposition, which is strongly against the fiscal consolidation measures and structural reforms that are necessary for financial support from the International Monetary Fund, the European Central Bank (ECB) and the European Commission.
“Although there was a slight decrease in deposits in recent weeks, the Greek banks maintained their liquidity, increasing their dependence on ECB funding”, says Moody’s, adding that the availability of ESF funding for Greek banks implies that that Greece complies with the conditions set by the troika and remains in the EU support program.
The latest figures from the Bank of Greece (BoG) show that private deposits at the end of November 2014 amounted to EUR 164.3 billion and the ECB funding to EUR 44.9 billion. The last source of funding for Greek banks is the Emergency Liquidity Assistance (ELA) from the BoG, which is not unlimited and is subject to approval by the ECB.
“We expect that the funding acquired by Greek banks recently with their borrowing from the interbank market and the securitisation of loans will be “dry” temporarily and this will worsen their liquidity, at least until the normalisation of the political situation and the new government reach an agreement with the troika for the support program, which was extended until the end of February 2015″, says the firm’s report, adding that the interbank lending has been marginally reduced in the last two weeks and has been replaced by ECB funding.
“Borrowers are likely to make negotiations with the banks for non-performing loans in the hope that any new government will promote friendly for them measures, including debt cancellation, a topic discussed widely by political parties in recent months”, Moody’s estimates.
Therefore, it adds, there will be a delay in the improvements of asset quality (of the banks), which the agency expected in the second half of 2015, since the non-performing loans will continue to increase, making difficult their return (banks) to operating profitability in 2015.