Recapitalizing Greece’s four main banks will cost less than 20 billion euros ($23 billion), two senior bankers with direct knowledge of the matter said on Tuesday ahead of the outcome of an assessment of their needs expected by the end of the month.
Capital controls, new austerity measures imposed as part of the country's third bailout and a mountain of non-performing loans have increased the credit risk and deteriorated the profitability outlook of Greece's banks.
The European Central Bank's Single Supervisory Mechanism is currently assessing the capital needs of National Bank of Greece , Piraeus, Alpha Bank and Eurobank .
"The capital shortfall for the four systemic banks should be less than 20 billion euros," said one senior banker who declined to be named.
The ECB declined to comment. It is expected to release the results of the financial health check on the banks on Oct. 31, another banker with knowledge of the matter said.
Fresh capital is needed to tackle the Greek financial system's credit quality problems, where bad loans exceed 100 billion euros or about 45 percent of all bank loan portfolios.
Under an international bailout agreed last summer, Greece is set to receive up to 25 billion euros of international money to recapitalise its banks, three of which are majority-owned by Greece's bank bailout fund HFSF.
"In any case the bill will be below 20 billion euros," another senior banker said. "Banks are readying new share offerings and will announce them right after the stress test results."
Banking regulators at the single supervisory mechanism have signalled that deferred tax credits, or DTCs, will not be an issue in their assessment of the banks and will be accepted as core tier 1 capital, bankers said.
"The DTCs are counted in core equity capital based on Basel rules. This is not a Greek patent, so there should not be an issue," one of the bankers said.
Greek banks had DTCs of 12.7 billion euros at the end of the first quarter, making up about 51 percent of their core regulatory capital.