Greek banks are at risk of collapse unless Athens completes an agreement with creditors within next week, said a Spiegel report.
The report is based on comments by several international bank executives. According to a Royal Bank of Scotland analyst, uncertainty about the future of Greek banks grows every week before the bailout agreement is signed.
An indication is the increase of non-performing loans by 50%. Unless there is bank recapitalization soon, banks are in danger of collapsing. The more red loans banks hold, the less business loans are given out and the economy is stifled. At the same time, the Greek debt increases.
According to the German magazine, European Central Bank (ECB) officials have stated that at least partial bank recapitalization is needed as soon as the third bailout deal is signed. This needs to be done before the autumn stress tests of Greek banks are conducted. A suggestion is 10 billion euros in bonds issued by the European Stability Mechanism (ESM).
However, views differ as to the time of recapitalization. Some ECB officials and other bankers argue that the recapitalization should be done after the autumn stress tests, Spiegel said.
Nevertheless, the report noted, it is everyone’s hope that with the impending announcement of the agreement, capital outflow will stop and banks will start to breathe. And when financial aid starts again, the Greek economy will get back on its feet.
If that does not happen, there will be a rude awakening by wintertime and Greek banks will need much more than the 25 billion euros currently estimated for their recapitalization, Spiegel said.