Stress Testing for Bad Loans Hits Greek Banks

International pressure to make Greece’s biggest banks increase their provisions against bad loans has seen the country’s major institutions take up billions of euros in cover.

A report by Bloomberg on Tuesday revealed that Alpha Bank, Eurobank, the National Bank of Greece and Piraeus Bank jointly had accumulated a €5.25 billion ($6.5 billion) burden.

Piraeus Bank alone posted a €1.6 billion hit on Tuesday.

The banks — Greece’s four largest — have to conform with new rules

Greece’s four largest banks have reported an aggregate burden of €5.25 billion euros ($6.5 billion) to comply with new accounting rules as European stress tests loom. The results are expected in May.

The International Finance Reporting Standard 9 is expected to come in stages but pressure is now on Greek lenders to deal with non-performing bank loans  (NPLs).

Bad loans have been a persistent problem in Greece and a January report by the European Commission showed Greek institutions own almost half of them.

According to data released by the EU Commission and the European Central Bank (ECB), the NPL quotas in Europe are falling steadily in relation to all the loans granted, but their performance in Greece is alarming.

In Greece, the NPL rate has fallen within 12 months from 47.2 percent to 46.9 percent, but it is by far the highest performance in the eurozone, meaning that almost half of the EU’s NPLs belong to Greek banks.