ECONOMY

Fitch: Recap will not be enough

fitch-recap-will-not-be-enough

The Greek bank recapitalization plan is essential to strengthen loss absorption buffers but will not, on its own, be enough to restore financial stability, Fitch Ratings said in a statement on Friday.

The local banking sector viability will remain weak until deeper structural problems are addressed, it added, explaining that “banks hold exceptionally large volumes of problem loans and funding structures suffer from material imbalances.”

However, Fitch went on to forecast that “provided remedial actions are approved for the banks, we calculate that their average pro-forma common equity tier 1 ratio will reach 14.8 percent.

Capital injections will also improve liquidity, particularly if they lead to the reinstatement of a waiver allowing the ECB to accept Greek bonds in exchange for ECB funding.”

[Reuters]