ECB Warns Top 4 Greek Banks Need to Raise $16 Billion

Greece’s four biggest banks, which suffered severe losses when they were shuttered this summer as the country veered toward economic collapse, must raise nearly $16 billion in new money to withstand any new crisis, the European Central Bank said on Saturday.

The central bank’s assessment was eagerly awaited by the financial world as a crucial step in determining how much money the Greek banks would require to achieve stability as the country tries to claw its way out of its deep economic hole.

One of the biggest problems for the Greek banks is the high number of loans to businesses and consumers that are at risk of not being repaid — nearly 50 percent of the loans outstanding.

The central bank report put a figure — 14.4 billion euros, or about $15.9 billion — on what it would take to address the bad-loan problem and enable the Greek banks to operate once again as fully functioning lenders. Without healthy banks to provide the lending and liquidity an economy requires, Greece would struggle to resume economic growth.

Though large, the number announced by the European Central Bank is lower than some experts had feared. And it means that as the banks move to meet their shortfall, it is less likely that bank depositors will be required to take losses. Instead, the money is expected to be raised from bank investors in some combination with funds from the €86 billion package of bailout loans that Greece agreed to this summer with eurozone creditors.

via CNBC

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 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