Greek banks expect to escape an extra AQR


There will be no extraordinary asset quality review (AQR) of Greek banks, senior credit sector officials have told Kathimerini following the public statements by the European Central Bank and based on various high-level meetings. They also note that local banks may spend more than 10 billion euros of their operating profits in the next three years on reducing bad loans.

Besides recent statements by ECB board member Benoit Coeure and the ECB’s Single Supervisory Mechanism Vice Chair Sabine Lautenschlaeger, who rejected the International Monetary Fund’s call for AQRs, the meetings bank officials have had in recent days with the technical staff of the creditors show that the latter do not consider an AQR likely.

The Bank of Greece has worked hard to avert such a prospect, which might destabilize the sector, and notes that local lenders should instead be focusing on meeting their targets for the reduction of nonperforming loans. After all, AQRs would make no sense right now given the exhaustive AQRs and stress tests by the ECB two years ago, bank sources underscore.

Senior credit sector officials tell Kathimerini that there are in fact a number of ongoing inspections by monitoring authorities which are conducting in-depth checks into the state of Greek banks and the course of NPLs. The same officials attribute the IMF’s persistence on the issue to reasons that are not related to the health of the local credit system, but rather to broader political matters.

The ECB recently issued banks with a strong message asking them to speed up the clearing of bad loans, or face inescapable consequences next year, but domestic bank officials argue that the reduction targets for 2017 will be met, adding that it is for 2018 and 2019 that the effort has to be accelerated.

The sector retains two cushions it can fall back on, bank officials say: annual operating profits of 4 billion euros and strong capital adequacy, which amounts to 16-17 percent, compared to a threshold of 12 percent the creditors have recommended.