NPL handling to determine stress test result

NPL handling to determine stress test result

The success rate of domestic banks in next year’s stress tests by the European Central Bank will depend on their meeting nonperforming loans reduction targets.

Senior credit sector officials say there is no margin for failure in the 2018 tests, as a capital deficit at any one of the country’s banks would trigger serious developments, feeding a new cycle of uncertainty and instability in the banking industry, with an obvious impact on the broader economy too.

It is reminded that new European legislation provides for bank bail-ins, with the participation of depositors with over 100,000 euros in their accounts.

Greek bank managers appear confident of success in the tests. They note to Kathimerini that the new tests will be much milder and less demanding than the previous ones, which subjected the loan portfolios of local lenders to in-depth probes and examined how they would endure some very adverse recessionary scenarios.

The 2018 stress test will not be as tough in terms of capital adequacy indices and there will be no single passing grade: The European Bank Authority will set a different capital adequacy threshold for each bank depending on its loan portfolio and the lender’s particular features.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.