BUSINESS

Preliminary deal on bank needs

BoG and troika agree to assess capital requirements of lenders according to the basic scenario of stress tests By Yiannis Papadoyiannis

Bank of Greece Governor Giorgos Provopoulos and the representatives of the country’s creditors reached a deal on the main parameters for the assessment of the capital needs of banks on Wednesday during their first meeting, though some secondary technical details still need to be ironed out, according to sources.

The BoG and the troika – i.e. the chief inspectors from the European Central Bank, the European Commission and the International Monetary Fund – have agreed that the completion of the recapitalization should rely on the basic (and not the adverse) scenario of economic conditions, and that banks should retain a capital adequacy index of 8 percent, despite the different approach of the two sides over the mode of calculation.

The disagreement concerns the actual financial impact of potential losses from bad loans, which leads to a difference of 2 billion euros, as the BoG estimates the capital needs of the Greek credit sector around 6 billion, while the troika puts them at 8 billion.

The central bank presented on Wednesday its detailed positions on the stress tests conducted by BlackRock late last year and said that the report on their results would be issued on Tuesday, March 4. The troika asked for a few days for its technical teams to examine the methodology. BoG sources said the issue of capital needs cannot remain open – especially after suggestions about requirements of 20 billion euros – and stressed that the report will definitely be published by Friday, March 7.

Meanwhile Reuters cited on Wednesday a bank official saying that non-performing loans (NPLs) amounted to 31 percent of all loans in September 2013, compared with the rate of 29.3 percent recorded in end-June by the Bank of Greece.

Credit sector officials say that since March 2013 there has been a marked slowdown in the creation of bad loans, reflecting the general improvement in financial conditions. They estimate that in end-2013 NPLs amounted to 32 percent and expect them to peak during the first half of this year.

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