Greece’s four systemic banks will make additional provisions totaling between 5 and 6 billion euros for the 2017 financial year in the context of adopting the new financial reporting standard IFRS 9. These provisions will directly burden the lenders’ capital and will not have an impact on their financial results.
Notably, this blow will not be taken into account for the European Central Bank stress tests, as the monitoring authorities have given banks a five-year period for absorption of the losses, with 30 percent recognized in the first three years and the remaining 70 percent in the following couple of years.
IFRS 9 alters the definition of forfeiture – i.e. when a loan becomes nonperforming – making it stricter and more specific, drastically reducing the scope for various interpretations by banks. In broad terms, all nonperforming exposures will be considered NPLs, thereby expanding provisions to NPEs too.
National, Alpha, Eurobank and Piraeus have decided on the amount of the additional provisions – a total of about 5.5 billion euros – as on February 21 they will have to finish off their financial reports for 2017, on which the stress tests will focus.