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Top Greek Banks would Lose €15.5 Bln of Capital in Stress Scenario: ECB

Top Greek Banks would Lose €15.5 Bln of Capital in Stress Scenario: ECB

Greece’s four biggest banks said on Saturday that no new funding plans were needed after stress test results showed they would lose around 15.5 billion euros of their capital by 2020 under an adverse economic scenario.

The health check of Alpha Bank, National Bank of Greece, Eurobank and Piraeus Bank by the European Central Bank was aimed at uncovering any capital shortage before Athens exits its €86 billion ($106 billion) bailout in August. It was carried out separately from a stress test of other euro zone banks, Reuters says.

The ECB’s stress test was done early to allow time for any possible capital shortfall to be filled before Greece leaves the rescue program.

According to the ECB, the 2018 health check was not a pass or fail exercise as no predetermined capital threshold was set that would trigger a need to recapitalize.

May’s exercise was their fourth stress test during the eight-year debt crisis. Their first recapitalisation took place in 2013 when a bank rescue fund, funded by its euro zone lenders and the IMF, pumped 25 billion euros into the four banks, while another 3.5 billion was raised from private investors.

After another health check in 2014, banks raised 8.3 billion euros from private investors on prospects of a recovery. However, a year later a new leftist government in Athens clashed with creditors, triggering a massive flight of deposits which led to capital controls.

Banks were forced to undergo another stress test and recapitalize again in 2015 at beaten down share prices, severely diluting existing shareholders. A total of 12 billion euros was pumped into them via rights issues and CoCo bonds.

Banks have been under regulatory pressure to tackle the bad debt problem, which restricts their ability to expand credit and help the economy recover. So-called non-performing exposures (NPEs) are the biggest challenge facing the sector, the Reuters report concludes.