ECONOMY

Moody’s issues warning about EU’s deferred tax asset probe

Moody’s said on Monday that a Brussels probe into deferred tax assets would constitute a credit negative event for Greek banks, as they may be deemed to have received state subsidies through a system that allowed them to defer tax payments from loss-making years to profit-making ones.

The international rating agency noted in a report that the European Commission is currently deciding whether to launch a full probe to see if Greece, Portugal, Spain and Italy have provided illegal state aid by allowing banks to bolster their capital with deferred tax assets.

It warned that “all four systemically important Greek banks would be negatively affected if the current practice is disallowed,” given that deferred tax assets account for a significant share of the capital at Alpha, National, Piraeus and Eurobank.

Moody’s explains that in such a case the systemic banks would have to resort to fresh share capital increases for a third time since 2013 and that the sum of their capital based on deferred tax assets amounts to 12.8 billion euros.