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Bank of Greece: Financial System Remained Resilient Through Pandemic

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Plaka and the Acropolis. Credit: Greek Reporter

The Greek financial system remained strong throughout the Covid-19 pandemic, the Bank of Greece stated in its report called the Financial Stability Review, which was released on Thursday.

Greece’s financial realm managed to weather the economic turmoil brought about by the pandemic and the two lockdowns that were imposed in the country, despite concerns over its strength, it noted.

While Greece’s economy has proven resilient, it did suffer a major recession in 2020 due to the pandemic, much like almost all other countries around the world.

The measures taken by the Greek government and the European Central Bank were examined in the Bank of Greece’s recent Review, and were found to have helped reduce any negative impacts of the pandemic on the Greek economy.

NPLs still pose major risk to Greek financial system

While stressing that the country’s financial system is indeed strong, the Bank of Greece also noted that the country’s biggest financial worry is the high number of non-performing loans (NPL) — loans that will either be paid back very late or never at all — in the country.

While the rate of NPLs was already high in Greece before the pandemic, the economic turmoil caused by Covid-19 has increased the number of them in the country significantly.

Despite initiatives by Greek banks to tackle the issue, such as the Hellenic Asset Protection Scheme, the rate of NPLs in Greece is much higher than in other European countries.

Capital adequacy ratios, or the ratio of a bank’s capital to its risk, are at a satisfactory level in Greece, however. This assessment accounts for temporary relief measures for banks in the wake of the pandemic.

Despite this, the Bank of Greece’s Review found that the quality of prudential own funds could pose risk to Greek banks, as deferred tax credits are expected to increase and banks implement plans to reduce NPL ratios.

The Bank of Greece argues in its review that the so-called “low-for-long” interest rates, which refers to low interest rates over a long period of time, have had a positive impact on the liquidity of the banking sector. However, core profitability in Greece remained low.

The Bank of Greece argued in its review that the banking sector will have to fulfill an intermediary role as the Government’s economic recovery efforts take hold in the coming months. Additionally, it contends that support measures should be phased out as the pandemic slowly comes to an end.

Greece receives record bids at bond sale

Greece received its strongest-ever demand for a bond sale and cemented its place as one of Europe’s most sought-after borrowers, according to Bloomberg on Wednesday.

Greece drummed up 30 billion euros of offers for its 2.5 billion-euro ($3.1 billion) sale of bonds due in 2031.

The Minister for Finance, Christos Staikouras, said that the bond sale “confirms that the country is gaining the confidence of the international investors community and is, gradually, returning to normalcy.

“Sacrifices made by the society, the effectiveness of the Government’s policy, the consistent and systematic work of the Public Debt Management Agency and the Ministry of Finance as a whole, result in positive outcomes for the economy, the society and country,” he added.

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