Athens wants ECB stress tests to factor in banks’ restructuring plans

Greece's Gikas Hardouvelis speaks to Jeroen Dijsselbloem, of the Netherlands, and Charis Georgiades of Cyprus before the meeing of finance ministers in June this year. [EU Council/Flickr]

Greece wants the European Central Bank’s health checks on its four biggest banks later this year to take account of their new restructuring plans rather than being based on last year’s balance sheet data alone, a Greek finance ministry official said on Monday (28 July).

Greek finance minister Gikas Hardouvelis raised the concerns at a 8 July meeting of EU finance ministers, the official told Reuters, as Athens wants to avoid the ECB calling for new capital to be raised following the tests when restructuring plans are already in hand but not yet implemented.

The ECB is reviewing the asset valuations of the eurozone’s 128 most important lenders to assess their ability to withstand future crises and Greece’s top four lenders will be among them. The results will be announced in October, before the ECB takes over as the eurozone’s banking regulator on 4 November.

At issue for Athens is whether its big banks may face a new call to fill significant capital holes, which could crimp their ability to fund an economy on the cusp of recovery after a six-year depression, since elements of the restructuring plans are still some way off being implemented.

“The minister told his counterparts that the ECB’s check-up must not be based on a static snapshot of banks’ end-2013 balance sheets but include EU-approved restructuring plans they submitted this year,” the official said, declining to be named.

The restructuring plans contain actions, including the divestment of non-core assets, that can further strengthen their balance sheets.

“Another argument the minister made was that a negative picture in the ECB stress test could have repercussions beyond the banking sector and affect the broader economy as well,” the official said.

National, Piraeus, Eurobank and Alpha have already undergone recapitalisations after two successive stress tests were conducted by the Bank of Greece, the country’s central bank.

National, Piraeus and Alpha are majority-owned by Greece’s HFSF bank rescue fund, which pumped €25.5 billion into the four banks and spent another €14.4 billion to wind down others deemed non-viable, battered by the debt crisis.

Earlier this year, the four banks raised €8.3 billion ($11.2 billion) between them through equity issues, more than filling the capital deficiencies identified in the last Bank of Greece test which amounted to a combined shortfall of €6.4 billion.

The head of the HFSF rescue fund, which has a remaining cushion of €11.5 billion, expects any capital shortfalls in the ECB check-up to be manageable.


Bank stress tests simulate disruptive market conditions to test banks' resilience to financial shocks.  The European Central Bank will become the eurozone's banking regulator on 4 November.


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