Three out of four systemic banks in Greece have failed their ECB stress tests. The results aren’t entirely devastating, however, since the banks’ capital needs are minimal and the European Central Bank is willing to re-examine the banks’ dynamic balance sheets.
“Greece’s Eurobank Ergasias SA (EUROB) and National Bank of Greece SA’s pledged restructuring measures may cut the 2.7 billion-euro ($3.4 billion) capital shortfall uncovered by European regulators to almost zero,” said a recent Bloomberg article.
Since the ECB took into account the dynamic balance sheet, Eurobank’s 1.76 billion-euro capital gap has proved no real shortcoming. The same stands for NBG’s 930 million-euro capital gap, according to the ECB’s website.
The four Greek systemic banks (Euroban, NBG, Alpha Bank and Piraeus Bank) were able to raise the necessary 8.3 billion-euros, now that the country is slowly recovering from a six-year recession.
“The results are manageable under the dynamic balance sheet approach,” Maria Kanellopoulou, an analyst at Euroxx Securities (EX) in Athens, stated in the Bloomberg article. “This means the banks have passed their last test and can go back to business.”
Greek Finance Minister Gikas Hardouvelis was satisfied with the stress test results and noted: “It’s extremely important that the reserves of 11.4 billion euros at the HFSF are left unused.”
In addition, Greek Prime Minister Antonis Samaras expressed his satisfaction, stating that the Greek Banks’ stress test results have exceeded expectations.
Meanwhile, three out of four banks in Cyprus (Bank of Cyprus, Central Co-op and RCB) passed the stress tests, while Cyprus’s Hellenic Bank failed with a capital shortfall of 176 million-euros.
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