While the consensus among analysts is that the European Central Bank will extend the exemption of Greek sovereign bonds from the rule banning junk-graded notes from the bond-buying program, even if this waiver is gone it should not pose any problems to Greece, economists tell Kathimerini.
Nondas Nicolaides, vice president and senior credit officer at Moody’s Investors Service, says: “We see minimal risks if the ECB does not extend the waiver, given that only part of Greek banks’ ECB funding is done through Greek state bonds. In any case, this portion of funding can easily switch to the inter-bank repo market, as was the case prior to Covid-19, at a marginally higher cost (lower benefit given the current negative rates) that would not be detrimental to banks’ profitability.”
“Funding prospects for Greek banks’ are unlikely to be compromised from such a possibility, in view of their sizable cash position that they can also use to settle any relevant dues to the ECB. There is also the possibility for some banks to mobilize other unencumbered ECB eligible collateral to replace Greek bonds, minimizing any downside risks to their funding profile. Concurrently, we expect customer deposits to continue growing robustly and banks to increasingly tap the international capital markets, which will also reduce the need for ECB funding by Greek banks by next year,” he notes.
Cristina Torrella, senior director of financial institutions at Fitch Ratings, adds that “the issuance of unsecured debt, along with the possibility of resuming secured funding such as repos, should facilitate the substitution of the ECB lending. Three large banks have already issued senior preferred notes and we have also seen issues of subordinated debt. In addition to that, it is also important to mention that Greek banks’ credit profile and ratings could improve in the near term if the entities continue progressing well on its strategic plans, which should further support the access and conditions to the market.”
Likewise, Goksenin Karagoz, director for Financial Institutions at S&P Global Ratings, anticipates that “should the ECB stop accepting Greek government bonds as an eligible collateral, Greek banks will start borrowing from their repo counterparties conditional on the investor sentiment remaining positive. We expect an impact on the cost of funding and current existing strong liquidity metrics to deteriorate.”