In Brief
Reliance on ECB funding drops in September Greek banks’ reliance on European Central Bank liquidity declined in September for a second month, according to the country’s central bank. Lenders held a total of 94.3 billion euros ($132.6 billion) for refinancing operations compared with 95.9 billion euros in August, according to a statement posted by the Athens-based Bank of Greece on its website yesterday. «It’s very good news, but this is still a very high number,» Alexander Kyrtsis, an analyst at UBS AG in London, said by phone. «This suggests that either deposit outflows are stabilizing or that they have found other sources of funding, which is unlikely, as they are locked out of interbank markets.» Greek banks, which have been hurt by concerns about their holdings of Greek government bonds amid fears of a sovereign default, have been locked out of markets and reliant on the ECB for funding. Greece agreed to austerity measures in May in exchange for 110 billion euros in emergency loans from the European Union and International Monetary Fund. Around 20 percent of the Greek banking system’s balance sheet is funded by the ECB, Kyrtsis said. (Bloomberg) Serbian banks in good shape to deal with crisis BELGRADE (Reuters) – Serbian banks are in good shape to cope with an expected rise in bad debts from companies due to the lenders’ strong capital buffers, bankers said on Wednesday. Serbian nonperforming loans (NPLs) including provisions rose to 17.5 percent of total loans in the second quarter from 16.5 percent in the first quarter and 15.7 percent in the third quarter of 2009, according to central bank data. «Overall, the corporate sector is a problem,» Bogdan Lissovolik, the International Monetary Fund resident representative told a panel. »The level of NPLs may rise in the corporate sector. Banks are well buffered and well capitalized against NPLs.» Due to high compulsory reserves imposed by the central bank, domestic commercial banks have been resilient to bad debt with a capital adequacy ratio above 20 percent in 2010. «The household sector stabilized as people have the so-called mattress-money buffer,» Lissovolik added. Serbia’s level of loans overdue for more than 90 days is one of the highest in emerging Europe, apart from crisis-ridden Ukraine and Latvia, and is the highest since Western banks entered Serbia after the ouster of Slobodan Milosevic a decade ago. Tax hike Cyprus is considering an increase in its 15 percent value-added tax rate as a deficit-reduction measure, Finance Minister Charilaos Stavrakis said, without specifying the size of the possible increase. «This is one possible measure» in a 150-million-euro ($211 million) package aimed at cutting Cyprus’s 2011 fiscal deficit to 4.5 percent of economic output, from a forecast 6 percent this year, Stavrakis told reporters in Nicosia today. Earlier, he briefed members of the Cyprus parliament finance committee on the 2011 budget. (Bloomberg) Persisting problems Greek, Irish and Portuguese bond yields will remain at «wide» premiums to German debt because the nations’ fiscal problems will persist, HSBC Holdings Inc said. Spain and Italy, also seen as high-deficit countries, are «relatively well placed» by comparison, Steve Major, global head of fixed-income research at HSBC in London, said in an e-mailed note. He cited the bank’s so-called sovereign scorecard, which uses data such as ratios of interest payments to revenue and deficit to gross domestic product. The scorecard put Greece, Ireland and Portugal in HSBC’s so-called third tier, the lowest group of countries, with Spain and Italy in the second tier. Greece applied for an International Monetary Fund and European Union rescue this year, while Ireland has canceled its planned debt issuance for the remainder of the year. «Greece, Ireland and Portugal remain unattractive according to this analysis,» wrote Major. «This Tier 3 group currently has limited or no access to public markets.» Other measures used in HSBC’s scorecard include nations’ contingent liabilities and the amount of debt due in 12 months as a proportion of outstanding debt. (Bloomberg)
