Hopes for smaller capital needs for banks

Senior bank officials are expressing optimism that the credit sector’s capital needs will eventually amount to lower levels than initially thought. The banks base their optimism on the course of the economy, which according to the data available to date has been better than anticipated, as has that of nonperforming loans.

Although Greece’s creditors estimate that the economic contraction in Greece will amount to 2.3 percent this year and 1.3 percent in 2016, the gross domestic product figures so far are leading to expectations that the economy will not shrink by more than 1.5 percent. Next year could even prove to be the one when the country’s economy returns to a positive course, provided that Sunday’s election results in a strong and stable government with a clear pro-European orientation that will quickly start implementing the bailout agreement.

The banishment of the political risk, combined with the completion of the recapitalization by the end of 2015 and the lifting of the capital controls could lead to a dynamic economic rebound in 2016.

Bank officials noted to Kathimerini that the impact of the bad loans has also been smaller than originally forecast after the imposition of the capital controls. Since the signing of the bailout deal there has been a significant increase in the number of households making arrangements to pay off their nonperforming loans, which is attributed to the end of expectations cultivated in previous years involving a privileged arrangement or a write-off of their debts.

In that context, the same credit sector officials estimate that the final amount of banks’ capital requirements will be considerably lower than 25 billion euros. According to the timetable, by end-September the assessment of loan portfolios will be completed and in October the stress tests will be implemented, according to which the capital needs of each lender will be determined.