Greek Banks to Lower Capital Ratios After Lenders Agree

Greece’s international lenders have agreed that a lower capital ratio can be used in a second stress test of the country’s major banks, bringing it in line with a European banking benchmark, a banker close to negotiations told Reuters on Thursday.

The country’s central bank has run a second health check on National Bank (NBGr.AT), Alpha Bank (ACBr.AT), Piraeus Bank (BOPr.AT) and Eurobank (EURBr.AT) to assess whether last summer’s 28 billion euro recapitalization has left them capable of absorbing future shocks as bad loans keep rising.

The ‘troika’ of lenders from the International Monetary Fund, European Commission and European Central Bank had wanted the test to be based on a Core Tier 1 capital adequacy ratio of 9 percent, the same as that used in the first round of domestic health checks in 2012.

That rate reflected the high rate of bad loans in Greece’s banking sector.

But the lenders agreed to cut the rate to 8 percent for the second check, bringing it into line with the benchmark used for European bank stress tests.

“The troika has agreed to a Core Tier 1 ratio of 8 percent in the baseline scenario,” the banker said.

The lower reference rate will mean lower capital needs for Greece’s four main banks.

The four are expected to need about 5 billion euros ($6.83 billion) in extra capital, two senior banking sources told Reuters last week, near the bottom of estimates that have ranged from 4.5 billion to 15 billion euros.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza