BoG head says banks may need more funds

By Yiannis Papadoyiannis

Bank of Greece Governor Giorgos Provopoulos said on Thursday that certain banks may need some additional capital once the stress tests conducted by BlackRock Solutions are published, as he could not foresee the result of the exercise concerning lenders’ loan portfolios.

Responding to questions from Greek MPs, the central banker underlined that there is no cause for concern even if banks do need to further strengthen their capital bases, as the Hellenic Financial Stability Fund (HFSF) has a large capital reserve amounting to 8.7 billion euros that will cover any additional requirements. Eurobank has already announced it will go ahead with a 2-billion-euro share capital increase, but it is not yet known whether it will be partly or fully covered by the HFSF.

It remains unclear when the results of the stress tests on the country’s lenders will be published, as the government and its creditors have not yet agreed on the final terms necessary for the issuing of the results. Greece’s creditors are in favor of stricter terms, while the banks are hoping for more lenient rules that will allow them to release some of their capital into the market.

The European Central Bank wants the funds that are not used for the recapitalization of the banks from the original 50 billion euros to be retained as a safety buffer for any future problems. The government, on the other hand, would like to utilize some of the unused funds to cover other needs, such as the bridging of the funding gap. Asked yesterday by New Democracy parliamentary spokesman Makis Voridis whether the HFSF surplus could be used to that end, Provopoulos declined to answer.

He reiterated his view that the Greek economy will start recovering this year, with the unemployment rate set to decrease, the drop in consumption to slow down, external demand growing partly thanks to tourism, corporate investment increasing and privatizations accelerating. He warned, however, against political instability that could be generated by the European and local elections in May.

Provopoulos also stressed that the central bank did all it was supposed to do on the issue of Hellenic Postbank, warning twice about its misconduct in the issue of loans and alerting the independent authority of money laundering, leading to the launch of the current judicial inquiry. However the central bank chief cautioned against what he called sweeping statements concerning the banking sector.