Talk among Greek bankers for a possible share capital increase that would reduce the state’s stake in the country’s four systemic lenders, coming in the wake of successful stress tests, has been met with a resounding “no” by the bank bailout fund (HFSF).
In the days after the European Central Bank revealed that the capital requirements of the country’s main banks are virtually zero, Greek bankers began exploring strategies to return the credit sector to private hands, which could only be achieved by squeezing the controlling stake of the Hellenic Financial Stability Fund in National, Alpha, Piraeus and Eurobank.
The HFSF, however, has quashed such plans for the time being and with good reason: With the stock prices of the four lenders at current low levels, the state could not possibly consent to a share capital increase that would entail losses to the HFSF’s portfolio.
Experts following developments on this front say that no big news should be expected on the issue in the next four to six months, arguing that political developments in the coming months are bound to play a key role: the possibility of early elections in March in the event that Parliament fails to elect a new president will affect the overall situation and stock prices in particular, whereas things will be much different if snap polls are avoided.
At least the other battle on the credit system front, centered on discussions in the last eight months over whether it requires any further strengthening, appears over as the ECB stress tests have shown that the domestic lenders are secure even in extreme credit conditions.
This development, combined with the ECB undertaking directly the role of monitoring authority for all European credit institutions, replacing national central banks, is expected to improve the profile of Greek lenders further, mainly in the eyes of their clients-depositors.
The specter of another capital flight – after the loss of over 70 million euros from the local credit system from 2010 to 2012 – remains ever-present but the sector just has to learn to live with it. At the same time, banks are planning their futures, varying from lender to lender. What they will have in common though is efforts to reform the country’s business landscape, conducted partly through the restructuring of corporate loans.
Another common point will be the banks’ contribution in the economy’s return to growth, as long as the state also plays an active role in that effort. For instance, bank officials warn that if the rules governing corporate bankruptcies remain on paper, no serious initiatives can be taken to restructure Greece’s various business sectors and separate the healthy and sustainable companies from those that are doomed.