Nonperforming loans (NPLs) issued by Greek banks soared again in the first quarter of the year, as according to a draft report by the representatives of the country’s creditors, delayed loans amounted to 29 percent at the end of March from 24.2 percent at end-December. This has taken their sum to 66 billion euros, although some 40 percent of that (26 billion) is covered by the banks’ provisions.
The representatives of the European Commission, the European Central Bank and the International Monetary Fund – known as the troika – do note however that the rate of creation of new bad loans has slowed, adding that the quality of banks’ portfolios is continuing to deteriorate owing to the recession.
In that context, the banks’ stress tests, to be conducted in the fall, constitute the next major challenge that local lenders are set to face.
According to the troika’s draft report, the upcoming stress tests represent the next main action to determine the strength of domestic lenders vis-a-vis the crisis and their capital adequacy ahead of macroeconomic developments and forecasts in terms of the country economic state of affairs.
Along with the stress tests, the draft reads, the next important steps for the Greek credit system are the development and implementation of a new strategy in the sector, the completion of concentration activity through mergers and acquisitions, as well as the further improvement of corporate governance of banks and of the Hellenic Financial Stability Fund (HFSF). The report also underscores the need for the strengthening of efforts for the resolution of troubled lenders and ways to manage nonperforming loans.
The troika further highlights the successful completion of the recapitalization process of the four systemic banks, National, Alpha, Piraeus and Eurobank, with the participation of private funds in the share capital increases of the first three adding up to 3.06 billion euros.