Banks expect to get better idea of the 2018 stress tests this month


Local bank managers are optimistic about the European Central Bank’s upcoming stress tests and are certain that no new funds will be required. They tell Kathimerini that the new exercise is more standardized and definitely milder compared to the previous one, when the European experts examined the loan portfolios of domestic lenders in depth and tested their strength in particularly adverse recessionary scenarios.

Furthermore, after the signing of the new agreement between the government and its creditors, the uncertainty has been drastically reduced and the economy should revert to growth from the second half of the year, while the picture should be even better next year.

Senior bank officials acknowledge that the key point is bringing down nonperforming loans. They stress that the reduction targets set for bad loans in 2017 – and agreed with the ECB’s Single Supervisory Mechanism (SSM) – must be achieved at all costs.

It is noted that the 2018 stress tests will be based on figures recorded in 2017. They will start early next year and the results are expected to be announced around mid-2018. In the next few weeks the first contacts will begin between banks and the SSM officials regarding the technical issues of the stress test. That should give bank managers a good idea of what the ECB experts have in mind.

This time there will be no single capital adequacy bar for all banks to clear, as the European Banking Authority (EBA) will set a different threshold for each lender depending on its specific features (loan portfolios, NPLs, quality of funds, internal structure etc). Bank officials add that there will be a different method of result publication, which will not lead to an immediate share capital increase, but offer greater flexibility to bank managements.