Local banks are anticipating this fall’s stress tests with much greater confidence than on the previous occasion. Besides the substantial strengthening they have received from the recapitalization process, they have several other reasons to be optimistic.
First, they have no Greek bonds in their portfolios, as the few that remained after the debt restructuring (PSI) were bought back by the state.
There has also been a significant improvement in the macroeconomic environment. The previous stress test took place in 2011, when a deep recession was anticipated for Greece. Now there is a growth forecast for 2014, so the negative scenario will provide for only a small decline in gross domestic product. Linked to that is another reason for optimism, that the stabilization of the economy will likely put an end to the increase in nonperforming loans and improve the credit system’s profits before provisions.
Finally, banks are more confident following the concentration of the sector, with as many as 11 banks being absorbed one way or another by the four systemic lenders in the last few months.