Optimism about Greek bank recap prospects after ECB unveils test results

Greek banks are expected to unveil their recapitalization plans in the coming days after the European Central Bank announced on Saturday that the capital needs of the country’s four systemic banks stand at 4.39 billion euros under the baseline scenario and 14.4 billion under the adverse, or crisis, scenario.

The results of the stress tests were welcomed by top bankers in Greece, who said that the relatively limited level of capital needs reflected the ability of local lenders to survive in difficult conditions.

They also told Kathimerini that there is interest from investors and that they would be able to raise the capital needed under the baseline scenario from the markets, which would ensure that the management of the four banks – Piraeus, National, Eurobank and Alpha – would remain in private hands and minimize the amount of public funds needed to plug holes.

Their optimism was echoed by Finance Minister Euclid Tsakalotos.

“The numbers, particularly under the baseline scenario, are satisfactory,” he told Reuters. “We have indications that the European Bank of Reconstruction and Development will participate. This is a good sign for private investors and Greek citizens because it marks a long-term commitment to the banking sector,” he said.

“We have every reason to be optimistic that the recapitalization process will be concluded by the end of the year.”

Piraeus has the biggest shortfall of all the lenders, having to raise 2.2 billion euros under the baseline scenario, and 4.9 billion euros in total. National Bank is seen having a total capital shortfall of 4.6 billion euros, of which 1.6 billion arises from the baseline scenario. Alpha Bank only needs to raise 263 million euros under the baseline scenario, of a total shortfall of 2.7 billion euros. Eurobank has the lowest aggregate shortfall, totaling 2.2 billion euros, of which 339 million corresponds to the baseline scenario.

“We are encouraged by these results,” said the European Commission in a statement on Saturday. “This is an important step in the implementation of the three-year Greek program under the European Stability Mechanism.

“The bank recapitalization process is an integral part of the efforts by Greece and its partners to restore confidence in the banking sector, so that capital controls can be gradually removed and affordable lending to the economy can resume,” it added.

The four Greek banks have to submit recapitalization plans to the ECB’s supervisory arm by Friday.