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European Central Bank: Greek Banks Need Up to 14.4 Billion Euros

Greek-banks1The European Central Bank has assessed that the four systemic banks of Greece need at least 4.4 billion euros and up to 14.4 billion euros to cover their capital shortfalls.
In the comprehensive assessment test released on Saturday morning the ECB revealed the extent of the problem for Alpha Bank, Eurobank, National Bank of Greece (NBG), and Piraeus Bank.
The test yielded the following results:
Alpha Bank: Baseline Scenario 263 million euros – Adverse Scenario 2.473 billion euros
Eurobank: Baseline Scenario 339 million euros – Adverse Scenario 2.122 billion euros
National Bank of Greece: Baseline Scenario 1.576 billion euros – Adverse Scenario 4.602 billion euros
Piraeus Bank: Baseline Scenario 2.213 billion euros – Adverse Scenario 4.933 billion euros
The four banks must raise at least the funds of the baseline scenario to avoid being nationalized. The remaining funds that a bank could potentially be unable to cover through shareholders and bondholders’ funds, will be covered by the Hellenic Stability Fund (HFSF) through stocks and contingent convertibles (CoCo bonds), which are essentially bonds that are converted to stocks once a company’s stock reaches a certain price. The ratio between stocks and CoCo bonds is not clarified by the legislation and is expected to be determined by a ministerial decision.
“The four banks will have to submit capital plans to the ECB’s Banking Supervision explaining how they intend to cover their shortfalls by the 6th of November. This will start a recapitalisation process under the economic adjustment programme that must conclude before the end of the year. Covering the shortfalls by raising capital will result in the creation of prudential buffers at the four Greek banks, which will improve the resilience of their balance sheets and their capacity to withstand potential adverse macroeconomic shocks,” the report reads.
The Greek Parliament will vote on Saturday, on a government sponsored legislation that dictates reforms in the banking sector in anticipation of the recapitalization. Among the legislation’s reforms are that the banks’ executive board must be composed by individuals with a minimum ten-year experience overseas, including three years in the banking sector, and who have not previously held any senior government posts.
The executive board of Greece’s four major banks are meeting on Saturday following the release of the results.

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