The application of the new accounting standard, the IFRS 9, will cost the Greek systemic banks some 7.6 billion euros according to Morgan Stanley, due to the additional provisions it will entail.
The Morgan Stanley report notes that the impact on Greek lenders is one of the highest among European banks.
The new International Financial Reporting Standard will some into force on January 1, 2018, but banks will be able to gradually amortize the new burden over five years. IFRS 9 obliges banks to make provisions not based on losses already incurred but rather on anticipated credit losses, which will lead to more provisions, weakening the banks’ capital base.
Morgan Stanley argues that the pressure from the International Monetary Fund for Greek banks to undergo fresh asset quality reviews (AQRs) and recapitalizations, as well as the fears that September’s German election might delay the third bailout review, generated a negative climate in the Greek market, which was aggravated by concerns about the consequences of IFRS 9. However, the report stresses that the external risks have diminished since the European Commission report that confirmed Greek banks are sufficiently capitalized after the third recapitalization, in late 2015.