The Financial Times in an article reports a debate between the troika and the Greek coalition government, concerning the amount of money that Greek banks need in order for Greece’s banking sector to be healthy.
On the one hand the troika estimates that the Greek banking sector requires a new capital of 15 billion euros. However, the Greek government on the other hand estimates that Greek banks need less than 6 billion euros in order to cover their deficit. According to FT “the dispute has become so contentious that the IMF has threatened to publish its own estimates of banking sector needs, which are close to €20bn if Athens proceeds with the €6bn figure.”
In addition the article highlights that “the European Central Bank, which officials say has similar estimates to the IMF, has also pushed for Greece to take a closer look at its conclusions. The ECB, which takes over as the EU’s bank supervisor later this year, is concerned Greece’s bank evaluation matches up with its highly anticipated eurozone-wide review before the year is out.” The article continues : “the ECB needs a significant number to signal that its comprehensive bank assessment later this year will not be a walkover,” said Mujtaba Rahman, head of European analysis at the Eurasia Group risk consultancy.
Moreover, a Greek banker commented on the dispute by saying to FT that “the government’s estimate is based on banks returning to profit next year, but troika officials believe that scenario is overly optimistic, particularly given the rapidly increasing rate of non-performing loans.
If prolonged, the dispute will undermine Greece’s chances of turning the economy around this year as banks are stalling on extending new loans to stimulate growth until the recapitalization is completed.”
According to a Greek Central Bank official, “the Greek central bank has said the result of the BlackRock stress tests will be announced at the end of the month, a three-month delay from its original plan. Part of the delay was due to the central bank’s decision to call in NM Rothschild and Ernst & Young to provide second and third opinions.
If the recap dispute is not resolved during this round of troika negotiations in Athens, the BlackRock exercise may be set aside, leaving it to be resolved by the ECB’s own stress test, a finance ministry official said.”
Greek Central Bank releases an official announcement in response to the FT report
Later today, the Greek Central Bank released an official announcement commenting on the FT article:
The Bank of Greece remains steadfast in an estimate that capital needs of Greece’s four systemic banks, following a round of stress tests conducted by BlackRock, totaled 5.5 billion euros. This estimate was presented to the management of Greek banks during a meeting with the Bank of Greece last week.
Bank of Greece officials and bankers said the report was clearly a means to exert political pressure ahead of the beginning of negotiations with the troika and stressed that all banks have been informed of the results of the stress tests. They also noted that much of the data offered by BlackRock to Greek authorities have been validated by Ernst & Young and Rothschild.