In Brief
Stress tests may assume 17 pct loss on Greek debt European Union banking regulators have told lenders that their planned stress tests may assume a loss of about 17 percent on Greek government debt and 3 percent on Spanish bonds, according to two people briefed on the talks. There are unlikely to be so-called «haircuts» on German government securities under the stress tests being overseen by the Committee of European Banking Supervisors, said the sources, who declined to be identified as the talks are private. Regulators are counting on the tests to reassure investors that banks have enough capital to withstand a debt default by a European country. US bank stocks rebounded last year after government analysis of their balance sheets found that 10 lenders needed to raise $74.6 billion in capital. «This sounds like the softest option possible,» said Stephen Pope, London-based chief global equity strategist at Cantor Fitzgerald. «If that is the indicator of how stringent the stress tests will be, then they aren’t worth too much.» Regulators should be applying a «haircut» of 20 percent on Greek debt and 7 percent for Spanish debt, he said. (Bloomberg) Greece ready to issue 1.25 bln euros in T-bills Greece will issue six-month treasury bills worth 1.25 billion euros ($1.58 billion) on Tuesday, officials said yesterday, marking the debt-hit country’s first market foray after a loan bailout. «On July 13, 2010, the Hellenic Republic will auction 26-week T-bills… with maturity January 14, 2011,» the Public Debt Management agency said in a statement. «The amount to be auctioned is 1.250 billion euros,» it added. The planned outing is Greece’s first after it was narrowly saved from a debt default in May by a 110-billion-euro rescue loan package from the European Union and the International Monetary Fund. Greek treasury bills worth 4.56 billion euros mature this month. (AFP) Cyprus property The total number of transactions in the Cyprus real-estate market will increase 25 percent this year following a «very bad year» in 2009, the president of the Cyprus Association of Valuers and Property Consultants said. «Overall transactions island-wide rose 23 percent in the first six months of 2010 and will stabilize at around 25 percent at the end of the year, while transactions involving foreigners will have increased 10 percent to 15 percent,» Charalambos Petrides said in an interview yesterday. The real estate recovery could be dented as Greek banks operating on the eastern Mediterranean island have raised deposit rates to attract money for lending in Greece, resulting in higher mortgages rates in Cyprus, said Petrides. Economic recovery in the UK and Russia – two main sources of foreign property-buyers in Cyprus – may also boost external demand, Petrides said. (Bloomberg) Output falls Greek industrial output fell 4.9 percent year-on-year in May with manufacturing shrinking 4.4 percent, data from the nation’s statistics service HELSTAT showed yesterday. (Reuters) Capital needs Deutsche Postbank AG, Banca Monte dei Paschi di Siena SpA and most of Greece’s largest lenders are the only publicly traded banks that may fail European stress tests and be forced to raise capital, Credit Suisse Group AG said. An economic downturn along with losses on government bonds would force Deutsche Postbank to raise 1.36 billion euros ($1.72 billion) in capital to meet Tier 1 capital requirements of 6 percent, while Banca Monte dei Paschi would need 592 million euros, Credit Suisse analysts led by Daniel Davies wrote in a note to clients yesterday. National Bank of Greece SA, Piraeus Bank SA, Agricultural Bank of Greece SA and TT Hellenic Postbank SA would together need a total of 2.61 billion euros, it said. «Across our coverage universe, we see little chance of any of the large non-Greek banks failing a stress test,» Credit Suisse said in the note. «Greek banks would only fail in the event of a severe haircut on their sovereign-debt holdings.» (Bloomberg) Right track Greece has been working on consolidation measures and is on the right track, European Central Bank executive board member Gertrude Tumpel-Gugerell told Austrian radio yesterday. «Greece is on a good path. The situation is, of course, being watched closely,» she told broadcaster ORF. (Reuters)
