Local banks eager to have their restructuring plans approved

By Yiannis Papadoyiannis

Domestic banks are in a race against time to have their restructuring plans approved as soon as possible so they can secure their participation in the European stress tests on the best possible terms.

Sources say that the country’s four systemic lenders, as well as other European banks, are trying to convince the European Banking Authority (EBA) to accept their revised restructuring plans and have their stress tests based on them. According to the rules, any European banks that have had their their restructuring plans approved by the European Commission will be tested according to the dynamic model, while those without approved plans will be tested according to the static model.

The dynamic model will have the 2013 financial report as its starting point, although the authorities responsible for the assessment of banks’ final capital requirements will factor in asset sales, share capital increases, deleveraging and any other actions included in restructuring plans.

However, in the case of those tested according to the static model, the authorities will base their projections to establish the capital strength of each bank on its 2013 financial report alone, without taking any restructuring actions into account.

As things stand, it appears Greece’s banks will be judged on the static model. However, after the share capital increases and the significant actions that their restructuring plans contain, Greek lenders are keen to have their plans approved by the authorities. Their applications have already been submitted and will be examined in the coming days.

Bank officials have told Kathimerini that if the dynamic model is used for the assessment of domestic lenders, they will be set to benefit greatly. They point to the strengthening of the systemic banks to the tune of 8.3 billion euros through the recent share capital increases.

According to the stress tests conducted by BlackRock Solutions late last year for the Bank of Greece, domestic banks’ capital requirements were estimated at 6.38 billion euros according to the baseline scenario used for the exercise. Bank officials had deemed that test as particularly strict, adding that the actual developments in the local economy will lead to a much more favorable picture in Greece’s credit sector.