The European Commission’s Directorate-General for Competition is to ask Greek banks to revise their restructuring plans in light of the rapid deterioration of financial conditions in the country.
Kathimerini understands that Brussels technocrats have already expressed to local banking officials their concerns regarding the existing restructuring plans, citing the need for an adjustment to the new macroeconomic data, the deterioration of liquidity conditions, the sharp increase in nonperforming loans (NPLs) and the general delays observed in the implementation of the plans owing to the political and economic uncertainty of the last few months.
The forecasts on the course of the Greek economy, on which the stress tests of last year had been based, provided for 2.9 percent growth this year, rising to 3.7 percent in 2016. These estimates are now seen as unrealistic and the Commission has already revised its estimate for 2015 to 0.5 percent.
Banks have also received two more big blows: The dramatic deterioration of liquidity conditions and the spike in bad loans. Since the start of the year, the flight of deposits has exceeded 30 billion euros and the sole access lenders have to funding is emergency liquidity assistance (ELA). Greek banks have drawn over 120 billion euros from the Eurosystem, fully reversing the commitments they had made in their restructuring plans to reduce their dependence on European Central Bank liquidity, as lenders have now slumped back to 2012 in dependence terms.
On the bad loans’ front, the uncertainty of recent months, the inability of the government to reach an agreement with Greece’s creditors and the cultivation of expectations about more favorable repayment terms have led to an increase in NPLs. From an estimated 34.4 percent in end-December, the rate of bad loans is estimated to have reached 35 percent in end-March and has kept growing since. This has weakened banks’ capital base and, unless the situation changes, lenders will have to face the need for a fresh capital increase.
All of these factors combined have created a radically new framework that renders the restructuring plans agreed between the banks and the Commission obsolete. Bank officials acknowledge that the issue of the revision will emerge sooner or later but note that no such discussion has been made yet. They add that the negotiations between the government and the creditors have to conclude first and a new program for the country’s funding agreed. Once normality is restored and the course of the country and the economy becomes clearer, banks could then reexamine their restructuring plans, the officials said.