ATHENS: An “unduly conservative” approach in stress tests on Greece’s major banks would have scared off investors, the head of Greece’s central bank said, adding that he believed the results would be close to EU-wide tests due later this year.
The banks’ capital needs were a sticking point in the latest bailout review by Greece’s lenders, which ended this week after six months of wrangling. The EU and IMF, which had estimated that the banks’ needs would be higher, said in a statement that there were “upside risks” to the Greek estimates and urged the banks to address the high level of non-performing loans.
But in an interview to be published in yesterday’s Kathimerini newspaper, George Provopoulos (pictured) was quoted as saying: “If were unduly conservative and imposed an overcapitalisation of the banks, we would run two serious risks.
“First, we would shake the trust of depositors, who would say, rightly, that for the banks to need a new big capital boost, they must be weak.
“The second danger would be that private investors who placed money in the capital increases of banks as part of last summer’s recapitalisation would lose any confidence in the country and its banking system.”
Greece’s four big lenders — National Bank, Piraeus Bank, Eurobank and Alpha Bank — were recapitalised last year to the tune of €28bn.
This month’s Bank of Greece health check, intended to establish whether they had enough capital to withstand rising bad loans, a further economic slump and other shocks, found that they needed to raise an extra €6.4bn.
Greece’s bank rescue fund, the HFSF, which recapitalised the banks last summer, has a remaining buffer of about €8bn to €9bn to address any additional needs.
The European Central Bank is due to carry out its own EU-wide health check later this year, and Provopoulos said he believed the results would be “close to ours”.