It Takes More Than $111 Billion Grexit to Sink ECB, Says RBC

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Capital Controls Are Here to Stay in Greece: Greene

The European Central Bank and its members have enough capital to withstand a Greek default or exit from the euro area, analysts said.

The Eurosystem, which comprises the ECB and the central banks of euro-area nations, has more than 500 billion euros ($554 billion) in buffers to deal with the aftermath of any such event, analysts at Royal Bank of Canada and JPMorgan Chase & Co. said. That compares with Greek liabilities of about 100 billion euros, or $111 billion, RBC estimates, while cautioning that a Greek exit could undermine the region’s economy beyond its direct financial linkages.

“Official-sector exposures to Greece do not appear to be insurmountable in the event of a Greek exit,” said Peter Schaffrik, head of European rates strategy at Royal Bank of Canada in London. “There is enough capital and buffers to cover any potential losses. Central banks in general can operate with negative equity.”

The Eurosystem’s capital and reserves totaled 98.5 billion euros as of June 18, according to RBC. Its revaluation accounts, which include unrealized gains on central banks’ holdings of assets such as gold and currencies, stood at 403.3 billion euros.

Greece’s Prime Minister Alexis Tsipras is under pressure as the country buckles under capital controls and a missed debt payment to the International Monetary Fund.

Debt Due

The country is due to repay 3.5 billion euros of maturing bonds plus interest to the Eurosystem on July 20 and a further payment of 3.2 billion euros on Aug. 20, according to JPMorgan analyst Aditya Chordia.

“A failure by Greece to pay this would not have a huge impact on the ECB and the national central banks’ balance sheet,” London-based Chordia wrote in a research note. “This may initially be viewed as a delay with some recovery value. The Eurosystem has a large financial buffer.”

Greeks will vote on July 5 whether to accept creditors’ austerity requirements attached to its international bailout. The outcome could determine whether the ECB pulls a financial lifeline.

Tsipras, in an attempt to break the deadlock, sent a letter to creditors saying he is ready to accept bailout conditions with some changes, according to a document obtained by Bloomberg. At the same time, in a speech on Wednesday, he called for voters to reject the terms being considered in the referendum on Sunday.

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