ECONOMY

Banks expect conditions to turn in their favor

As much as 14 billion euros has been wiped off the systemic banks’ capitalization in the space of just a few months, as political uncertainty and the international economic environment have weighed heavily on stock prices.

Hardly anyone could have imagined that less than four months after the banks’ successful share capital increases, their return to the international money markets and the privatization of Eurobank, the overwhelmingly optimistic mood would have evaporated.

In record time, things were turned upside down: Since early June Piraeus Bank’s bourse value has declined by 4.6 billion euros, that of Alpha by 3.3 billion, National by another 3.3 billion and Eurobank by 2.7 billion euros.

There are two main factors behind these losses. The first concerns the general deterioration of conditions on international markets and worries that the eurozone will slide back into recession.

Besides the situation in Europe, there are major concerns regarding the economies in the East, geopolitical tensions and the threat of the Ebola virus.

On top of this came fears over the risk of a snap poll in Greece ahead of the presidential election in spring and the possibility of political instability in the country.

An additional cause for concern is the European Central Bank’s stress tests and the danger that local banks will require extra capital. The stress tests are in the final stretch and it is just a matter of days before the announcement of the results. On Thursday the ECB will inform banks’ top-level managements about any capital requirements as determined by the exercise. Banks will then have two days to submit any disagreements they may have concerning the results.

The ECB will formally publicize the stress test results on Sunday, October 26. On the same day the lenders will prepare statements regarding their own capital needs and how they plan to deal with them.

Once they have been approved by the Bank of Greece, they will be published on the morning of October 27, ahead of the stock market opening.

If required, banks will also immediately submit plans for the coverage of their capital deficit that will be examined by the ECB and approved by December 12.

Officials at domestic banks have told Kathimerini that all the signs point to a positive outcome in the stress tests, saying that the capital requirements will be relatively small and manageable. That should also serve to cover some of the capitalization lost on the market as it will do away with one of the factors of uncertainty.

The acknowledgement of banks’ deferred tax credits, which could bolster their capital by 1 to 3 billion euros, will also contribute to the easier handling of the new requirements.

Last week the government tabled in Parliament the amended regulation that incorporates the demands and observations of the European Bank Authority.