Pressure on the local banking system is increasing as a memorandum between the Bank of Greece and commercial lenders is imposing a series of tough measures aimed at strengthening the system.
The sector?s general conditions, the overall situation in the economy and pressure from the BoG and Greece?s creditors for the creation of stronger banks pave the way for the opening of a new consolidation cycle.
Last week BoG Governor Giorgos Provopoulos met the heads of the commercial banks and informed them about the memorandum destined to offer the local banking system a capital shield. The memorandum provides for all banks to have their main equity capital index, known as Core Tier 1, at 10 percent from the start of 2012. Core Tier 1 does not include hybrid funds, but includes the privileged shares the state has acquired, adding up to about 5 billion euros.
Already the average Core Tier 1 index of the Greek banking system stands at 10.4 percent today as a considerable number of banks fulfill this requirement. However, banks below 10 percent will have to take initiatives in order to strengthen their capital basis in the coming months.
The BoG is also working on a strategy to accelerate the opening of the interbank market to local lenders, so as to render them independent from European Central Bank funding.