With the announcement of the European Central Bank’s stress test results fast approaching, probably on October 26, Greek banks are pretty confident they will clear the hurdle.
Speaking to CNBC, Piraeus Bank Chief Executive Anthimos Thomopoulos expressed optimism regarding the results of the asset quality review (AQR) and the stress tests, as well the state of local lenders in general.
He reminded viewers that no banking system in Europe has ever been subject to the kind of scrutiny that Greece’s is currently experiencing and stressed that the ongoing exercise – which will determine any possible capital needs in case of extreme financial conditions – is the third stress test local lenders have undergone in the last few months.
The Piraeus executive estimated that Greek banks have a “capital cushion” of 6-7 billion euros, which seems adequate according to the baseline scenario for the absorption of any results from the upcoming AQR. As for the anticipated outcome, “I hope it will dispel any concerns regarding the capital and the health of the Greek banks. We will then be able to focus our attention on the real economy and do more to support Greece’s recovery,” said Thomopoulos.
Regarding nonperforming loans, he said that while the situation “remains ugly,” it has stabilized, and estimated that we will soon see bad loans “return to life,” instead of having a further increase in NPLs.
The test results will be based on the 2013 financial reports and will not factor in any additional actions such as asset sales, expenditure cuts and deleveraging. Banks will then have to state any actions they took up until yesterday, the last day of September, and if they still show a capital shortfall they will have two weeks (up to November 7) to submit to the ECB a plan to cover it.