Greece’s finance ministry and the country’s largest banks expressed yesterday (1.11) their optimism about the outcome of the third bank recapitalization, following the announcement of the results of European Central Bank’s stress tests on Saturday (31.10).
The European Central Bank announced that Greece’s four main banks - National Bank of Greece SA, Piraeus Bank SA, Eurobank Ergasias SA and Alpha Bank AE – must raise 14.4 billion euros fresh capital and their recapitalization plans should be submitted to the ECB’s supervisory arm by Friday, November 6. Of this sum, 4.4 billion euros will have to be collected from the private sector to cover the baseline scenario in order to avoid the prospect of nationalization, based on a legislation that was introduced in Parliament on Friday.
“The numbers, particularly under the baseline scenario are satisfactory” Finance Minister Euclid Tsakalotos told Reuters, adding that “we have indications that the European Bank of Reconstruction and Development will participate which is a good sign for private investors and Greek citizens”.
Speaking in parliament on Saturday, Tsakalotos also said that the recapitalization will be implemented along with a plan to resolve the issue of non-performing loans…so that by the end of the year both procedures will have been completed”. The Greek cabinet is expected today to issue the act of law that sets out the process of banks' recapitalization.
The results of the stress tests were welcomed by the heads of the four banks, who stressed that that the relatively limited level of capital needs reflected the ability of local lenders to survive in difficult conditions and that there is investors interest to raise the baseline scenario capital so that that the management of the four banks would remain in private hands.
The results were also welcomed by the European Commission, stating that the bank recapitalization process is an integral part of the efforts by Greece and its partners to restore confidence in the banking sector, so that capital controls can be gradually removed and affordable lending to the economy can resume.