BUSINESS

Deferred tax asset inclusion to boost banks’ capital bases

By Yiannis Papadoyiannis

The Bank of Greece decision in favor of acknowledging the full amount of available deferred tax assets (100 percent compared with 20 percent until now) as part of the commercial lenders’ capital bases constitutes a major boost for local banks amounting to about 5 billion euros in total.

This of course is beneficial to the banks solely in terms of accounting, with the impact of the stress tests expected to be smaller while the decision also depends on the approval of the country’s creditors.

Bank officials have told Kathimerini that the total deferred tax assets, mostly concerning the great losses from the private debt restructuring (PSI), amounted to 9 billion euros, with just 4 billion of that having been included in the banks’ financial reports. Crucially for banks, the accounting boost to their capital adequacy indices takes all the systemic lenders well above the 8 percent threshold, under which funding is only conducted through the local central bank’s emergency liquidity assistance (ELA).

According to estimates by Euroxx Securities, the Core Tier I index based on pro forma data for the first nine months of 2013 stood at 15 percent for Piraeus Bank, 14.5 percent for Alpha, 13.5 percent for Eurobank and 10.1 percent for National, which has only recognized 1.6 billion euros of its deferred tax assets out of a total 4.5 billion.

Another boost to banks has come from the decline in the cost of funding, which gathered pace in the period from July to November 2013. At end-September the average interest rate for new deposits came to 1.81 percent, against 2.51 percent in May and 2.75 percent in September 2012. That means that the average interest rate of new deposits has dropped by over 34 percent within just one year.

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