Key time for small lenders

The clock seems to be ticking for small banks in Greece, as a new environment in the sector, under a stricter monitoring framework, makes life more difficult for them. Sources suggest that the Bank of Greece (BoG), the country’s central bank, is desirous of the creation of bigger lenders, believing that this would strengthen the local banking system to make it more steadfast in the face of possible problems while also bolstering competition. The central bank is preparing to take over the administration of any banks that might be forced to stop operations. A recent stress test by BoG and the International Monetary Fund has shown that the local banking sector would be able to withstand even extreme problems but a number of small banks are likely to be unable to survive, as their capital bases would weaken considerably. This would not lead to any systemic danger but the BoG wants to rule out any such scenarios by asking for share capital increases from lenders with strong shareholders as well as for initiatives for the creation of stronger groups from those who lack the capital support of shareholders at present. The first victim of the crisis has been Proton Bank; its only option for survival was to enter the Piraeus Group. Some say other small groups may end up with the same fate. Greece’s medium-sized banks are Marfin Egnatia, Geniki Bank, which has already proceeded with a capital increase, Millennium Bank and Hellenic Postbank. Even smaller ones include ProBank, Attica Bank, Aspis Bank, Panellinia Bank and First Business Bank.