Countdown Starts for Latest Greek Bank Stress Test Results

  • Greek officials are confident lenders will pass the exam
  • Release date could still shift; results haven’t been finalized

The European Central Bank will probably announce the stress-test results for Greece’s four largest banks on May 4 or May 5, leaving more than three months to sort out any problems before the country’s latest bailout program expires, according to a European Union official familiar with the plan.

The Greek government has nearly 20 billion euros ($24.7 billion) of bailout cash left to shore up banks before the program ends in August. If the banks don’t need the money, it can be used to tackle other needs, such as debt-relief measures. And confidence is growing that Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank Ergasias will pass the exam.

The stress-test results will show that the four banks have sufficient capital even under the exam’s adverse scenario, according to two Greek officials with knowledge of the matter. The ECB will probably ask for medium-term capital plans to reduce the firms’ reliance on deferred tax claims against the Greek state, but will stop short of requiring them to boost capital immediately, the officials said, asking not to be identified because the test is still under way.

The EU official, who also asked not to be identified, said the results aren’t ready yet. The heads of the Greek banks will discuss the exam with the ECB’s oversight arm on Wednesday and Thursday.

The ECB declined to comment.

Bad Loans

Awash in bad loans, Greece’s banks are struggling to recover from the steepest recession in the country’s modern history and the biggest sovereign debt restructuring ever. After three rounds of capital injections in the last five years, lingering doubts about the quality of their portfolios have weighed on their valuations.

Heavy Burden

Greek banks have the highest ratio of soured loans in the euro area

Source: European Central Bank; data as of end-September 2017

Leonidas Fragkiadakis, chief executive officer of National Bank of Greece, said on April 16 that the stress tests results for Greek lenders should be encouraging. His comments spurred a market rally that pushed the benchmark Athens Stock Exchange bank index up by 7.4 percent. Bank shares rose again by as much as 3.6 percent on Tuesday.

Greek bank transactions are still subject to capital controls following a clash between the government of Alexis Tsipras and European creditors in 2015 that wiped out the market value of lenders and brought the country’s system to the brink of total implosion. European creditors say that no further use of public funds will be needed to boost their capital, a position that the International Monetary Fund has repeatedly disputed.

— With assistance by Marcus Bensasson

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