How the world sees Greece
Athens, September 9, 2015/ Independent Balkan News Agency By Spiros Sideris The assurance that there won’t be new bank mergers gave an official of the Bank of Greece, after a meeting of Yannis Stournaras with interim finance minister George Chouliarakis. During the meeting it was concluded that private investors should participate in the capital increase, […]
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Bad loans in Greek banks have reached 45 percent of loans after capital controls were imposed at the end of June, says a Kathimerini report. The percentage of bad loans was 40.8 at the end of the first quarter of 2015. A bad loan is defined as credit more than 90 days in arrears. Capital
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Pointing to the parliament building overlooking his small cafe in Athens' Syntagma Square, the 35-year-old blames GREECE'S turbulent politics for the ...
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Political stability and the successful recapitalisation of Greek banks are needed before Greece can lift capital controls imposed in June to avert a financial meltdown, the chairman of Greek lender Eurobank said on Monday. Greece was forced to shut its banks and impose limits on withdrawals and capital movements to keep them from collapsing, when its talks with lenders over a third bailout hit an impasse and Greece risked having to quit the euro. "The formation of political stability, the successful recapitalisation of the banks and the restoration of liquidity are the basic conditions which will enable the removal of restrictions on capital movements as soon as possible," Chairman Nikos Karamouzis was quoted by the bank as telling a meeting with Greek business federation SEV.
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Euro zone finance ministers this month agreed an 86 billion euro ($98.6 billion) third aid deal for Greece which includes 25 billion euros for plugging ...
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Greece imposed capital controls and ordered banks to shut temporarily on June 29, after the European Central Bank had refused to increase ...
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Greece's four banks – National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank – account for 91 percent of Greek banking assets.
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Aim is to recapitalise Greek banks by year-end. * This avoids depositors being forced to fund rescues. * Capital controls can't be lifted till banks secure.
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The Greek banking system could be slowly regaining some pace. Bloomberg reported on Tuesday that since Greek banks reopened on July 20, customers have deposited 1 billion euros in the country’s banks. The news agency cited an anonymous senior official at the Bank of Greece who also said that the European Central Bank will conduct a stress test on Greek banks
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Greek stock markets opened again on Monday after a five-week hiatus, and as expected, the Athens index initially went through the floor. Huge economic damage has been done to the country during the bank closure period, as shown by yesterday's manufacturing PMI figure. July saw the most severe industry contraction during the whole of Greece's crisis period, and employers shed jobs at the fastest rate in at least 16 years. The banks themselves, of course, were hit pretty dramatically by the move. They were not only shuttered for weeks, but capital controls have severely restricted their ability to do any international business, and the bailout drama has made European Central Bank support much less certain. Here's what happened to Alpha Bank, one of Greece's biggest, in the first two days of Greek trading: It's the same story at Bank of Piraeus, another of Greece's four major listed banks: Piraeus shares are now worth less than 0.2% of what they were at the peak in 2009, and in terms of market value, it's a shrivelled husk of what is once was. Here's how it looks look over the long term: The four banks (Alpha Bank, Bank of Piraeus, Eurobank and the National Bank of Greece) have seen their share prices fall by half in the last two days overall.Join the conversation about this story » NOW WATCH: You've been rolling your shirtsleeves wrong your entire life
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NICOSIA, Aug. 2 (Xinhua) -- If Cyprus can be an example to judge by, Greece would need many months or even years to lift capital controls imposed ...
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ATHENS, July 31 (Reuters) - Greece will make it a priority to recapitalise the nation's banks by the end of this year, probably using a bail-out fund to ...
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The capital controls imposed on Greek banks three weeks ago may be in place for months until the country’s European partners provide fresh money to the banks. According to Reuters, the rehabilitation process for Greek banks could continue for months. “Rehabilitating the country’s banks poses a difficult question. Should the Eurozone take a stake in the
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Greek banks are largely funded through deposits, but the impending process of “resolution” could provide clues for investors holding bank bonds in ...
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The banks are re-opening, though just for transactions, so people can pay their bills and their taxes, pay in cheques, that kind of thing. The cash withdrawal limit has been changed to a weekly limit of 420 EUR per card per person, enabling households to manage their cash flow better. But the capital controls remain: money cannot leave the country without the agreement of the Finance Ministry. And the banks remain short of cash: although the ECB has raised the funding limit by 900m EUR, that only amounts to about 80 EUR per Greek so won’t go very far. But the tourist season is in full swing, and tourists have been advised to bring cash into the country rather than using ATMs in Greece. On balance, therefore,Greece’s monetary conditions should be easing. But there is another tranche of bailout conditions to be agreed by the Greek Parliament by Wednesday 22nd July: the adoption of the Code of Civil Procedure, which is a major overhaul of procedures and arrangements for the civil justice system and can significantly accelerate the judicial process and reduce costs; the transposition of the BRRD with support from the European Commission. The first of these is relatively uncontroversial, though a tall order to implement at the speed that the creditors demand. But the second has serious implications for Greek banks and their customers, especially in the light of this part of the bailout agreement: Given the acute challenges of the Greek financial sector, the total envelope of a possible new ESM programme would have to include the establishment of a buffer of EUR 10 to 25bn for the banking sector in order to address potential bank recapitalisation needs and resolution costs, of which EUR 10bn would be made available immediately in a segregated account at the ESM. The Euro Summit is aware that a rapid decision on a new programme is a condition to allow banks to reopen, thus avoiding an increase in the total financing envelope. The ECB/SSM will conduct a comprehensive assessment after the summer. The overall buffer will cater for possible capital shortfalls following the comprehensive assessment after the legal framework is applied. Back in the autumn of 2014, the ECB & EBA conducted stress tests on European banks, including all four of Greece’s large banks (which together make up about 90% of its banking sector). The Greek banks at that time passed the stress tests and were deemed solvent. They are now supervised not by Greek regulatory bodies, but directly by the ECB under the Single Supervisory Mechanism (SSM). Yet now, eight months later, sufficient damage has apparently been done to Greece’s banks to render them collectively insolvent. What on earth has gone wrong? Greece’s banks have suffered a continual deposit drain since the beginning of the year. This is how they became dependent on emergency liquidity assistance (ELA) funding from the Bank of Greece. But liquidity shortfalls do not cause insolvency unless they are covered by means of asset fire sales. In this case, the liquidity drain was until 28th June covered by ELA. Collateral has to be pledged for ELA funding, and Greek banks consequently found their balance sheets becoming more and more encumbered. To make matters worse, the ECB recently increased collateral haircuts for Greek banks. Now the banks are reopening, it is not clear how much collateral they have left for ELA funding. Whether the ECB will relax collateral requirements to allow a wider range of assets to be pledged remains to be seen. It is probably conditional on good behaviour by the Greek sovereign. But it is not the funding side of Greek banks that is the real problem. It is the asset base. Greece went into recession in Q4 2014 (yes, BEFORE Syriza came to power). Since then, there has been a considerable fall in output caused mainly by lack of confidence. On top of this, the Greek sovereign has been running substantial primary surpluses all year in order to maintain payments to creditors in the absence of bailout funding. It has done this not by collecting more taxes but by a considerable squeeze on public spending: this has mainly taken the form of delaying payments to the private sector. Additionally, the private sector itself has cut back spending and investment. The result is that real incomes have tumbled, unemployment has risen and loan defaults have increased. Non-performing loans in the Greek banking sector were already high at the beginning of the year but are now believed to have risen substantially. This is the principal cause of the possible insolvency of Greek banks. So the bailout plan includes recapitalisation of the banks using a loan from the European Stability Mechanism. This loan would be repaid from sales of sequestered assets in the privatisation fund that also forms part of the bailout agreement (my emphasis): to develop a significantly scaled up privatisation programme with improved governance; valuable Greek assets will be transferred to an independent fund that will monetize the assets through privatisations and other means. The monetization of the assets will be one source to make the scheduled repayment of the new loan of ESM and generate over the life of the new loan a targeted total of EUR 50bn of which EUR 25bn will be used for the repayment of recapitalization of banks and other assets and 50 % of every remaining euro (i.e. 50% of EUR 25bn) will be used for decreasing the debt to GDP ratio and the remaining 50 % will be used for investments. So, let’s put this jigsaw puzzle together. 1. Greek banks are currently reopening for transactions only. The cash withdrawal limit is likely to remain in place for the whole of the summer, effectively limiting Greeks’ ability to hoard physical cash, and the capital controls that prevent money being moved outside the country will also remain in place. 2. The Greek government is required to fast-track through legislation to implement the European Bank Resolution & Recovery Directive in Greece. Once implemented, bank resolutions will involve bail-in of unsecured creditors. 3. In the autumn, the ECB/SSM will conduct another asset quality review of Greek banks to determine their solvency. Most estimates of the expected capital shortfall seem to be of the order of 15bn EUR without including deferred tax assets (DTAs), a form of capital extensively used in Greek banks that the ECB has already indicated it intends to phase out. If the ECB excludes DTAs from the CET1 definition, the bill would be at least double that. 4. Once the outcome of the asset quality review is known, the Greek banks will be recapitalised by the ESM. This implies use of the ESM’s direct recapitalisation facility, which will not be available until January 2016. The banks would be supported by ELA until then, but the cash withdrawal limit and capital controls would remain in place to prevent cash hoarding and capital flight. So Greeks face the prospect of continuing restrictions on access to and use of funds for at least the rest of the year. There are two significant implications of using the ESM’s direct recapitalisation facility. Firstly, ESM recapitalisation is de facto nationalisation of the banks by Greece’s Eurozone creditors, bypassing the Greek sovereign. Once the banks were recapitalised and – presumably – relieved of their non-performing loans, they would be sold back to the private sector. The proceeds of their sale would go to pay back the ESM loans. The asset privatisation fund therefore implicitly includes all the Greek banks. Not many people seem to have understood this. Secondly, the ESM’s direct recapitalisation tool requires bail-in of 8% of liabilities. Silvia Merler at Bruegel explains what this would mean for Greek bank bondholders and depositors: Bail-in would require full haircut of subordinated/other bonds, full haircut of senior non-guaranteed bonds and still a haircut of uninsured deposits ranging between 13% and 39% for three out of four banks. This would already bring all banks above the 4.5% CET1 threshold and two of the banks above 8% CET1. The remaining capital shortfall would be covered by the ESM and Greece together, but the Greek contribution could be suspended. The ESM would effectively play only a very limited role. Silvia discusses an alternative, ESM direct recapitalisation with bail-in according to amended State Aid guidelines, which would mean bail-in of junior bondholders only: The amended State aid guidelines require only bail-in of junior debt in the transition to the Bank Recovery and Resolution Directive (BRRD). After a 100% haircut on subordinated/other non-senior debt, the banks’ CET1 would still be below 4.5% in some cases. Under the ESM direct recap’s priority ranking, Greece needs to bring the banks to 4.5% CET1 before the ESM steps in and take them to 8%. With a conservative DTAs assumption, the contribution to reach 4.5% could be substantially bigger than the ESM contribution for those banks that are less capitalised and that do not have much bail-in-able junior debt. However, this contribution could be suspended by mutual agreement in light of the fiscal situation of Greece. If so, the ESM would play a more meaningful role. I’m afraid I don’t think this second alternative is likely. The creditors are in no mood to cut Greece any slack, and the fact that steps are being taken to ensure that deposits don’t leave the banking system in any quantity suggests that the intention is to bail them in. If I am right, then the potential economic outcome is terrible for Greece. The last time uninsured deposits were haircut was the resolution of Cyprus’s two failing banks in 2013. On that occasion, a reasonably large proportion of the cost was borne by foreign depositors, principally Russians, although Cypriot businesses, institutions and households also took a hit. One interesting effect of the Cyprus bail-in was that non-performing loans increased: people whose deposits were frozen were too angry to service their loans. The economic consequence of the Cypriot bank failures, including deposit bail-in, was a fall in GDP of around 6%: But the situation in Greece is very different. Most large depositors have removed their money already. The remaining uninsured deposits – about 30% of the deposit base – are mainly the working capital of Greek businesses. Bailing these in would be far more destructive for the Greek economy than the bail-in of large depositors was for Cyprus. It is hard to put a figure on exactly what the GDP fall would be, but we should expect it to exceed the Cypriot fall by quite a bit. And this is on top of the 25% fall in GDP Greece experienced 2010-14, and a further projected 2-4% fall in GDP as a direct consequence of the output fall in the first six months of this year, and a planned fiscal tightening of 3% of GDP, and who knows how much of a collapse in the remainder of the year if cash withdrawal limits and capital controls remain in place as I expect. Silvia argues that the working capital of Greek businesses would be exempt from bail-in because of its systemic consequences: BRRD foresees some exemptions concerning bail-in, which the ESM direct recap does not have at the moment. Article 43(3) of the BRRD directive provides four exceptions, stating that in those cases the resolution authority may exclude or partially exclude certain liabilities from the application of the write-down or conversion powers. One of these exemption is when “the exclusion is strictly necessary and proportionate to avoid giving rise to widespread contagion, in particular as regards eligible deposits held by natural persons and micro, small and medium sized enterprises, which would severely disrupt the functioning of financial markets, including of financial market infrastructures, in a manner that could cause a serious disturbance to the economy of a Member State or of the Union”. This is evidently happening at the moment in Greece, where a full-fledged bank run is being kept contained only because of capital controls (which should unquestionably qualify as a “severe disruption of the functioning of financial markets”). I’m afraid I disagree with Silvia. The existence of capital controls eliminates contagion and makes it possible to bail-in deposits that would normally be considered to have systemic consequences. Provided that cash withdrawal limits and capital controls remain in place until bail-in, therefore, there should be no destabilising effects on financial markets or financial market infrastructures. And apparently the microeconomic foundation of the economy can be destroyed with impunity as long as financial stability is not threatened. So therefore I think that bailing-in large deposits and senior unsecured bonds as well as junior debt is exactly what the creditors have in mind. Bailing-in the deposits of Greek corporations and sole traders would be the clearest indication so far that restoring the Greek economy is on no-one’s agenda. It amounts to a massive heist of the Greek private sector’s disposable income. I suspect Alexis Tsipras realised something like this was on the agenda, since he insisted that part of the privatisation receipts must go to new investment. But would this really be sufficient to offset the losses to Greek businesses and households of such a draconian bail-in? The more I look at it, the less benign this bailout deal appears. Indeed it looks to me as if it was set up to do considerable damage to the Greek economy. Once this becomes apparent, Greeks are surely likely to change their minds about staying in the Euro. And I’m afraid I think this is the point. One way or another, Greece is on its way out of the Eurozone. Join the conversation about this story »
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Just because the doors of Greek banks are open today, don't be fooled into thinking they and the Greek economy are anywhere near back to recovery. There are still major restrictions on the ability of their customers to obtain their cash or move it around ...
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New York (AFP) - Large US banks reported mostly higher second-quarter earnings this week even as a pullback in trading revenues due to crises in Greece and China dented results.The biggest hit came at Goldman Sachs, where revenues in bonds, foreign exchange and commodities trading fell 28 percent in the second quarter."Obviously Greece has been in the headlines continuously and that certainly weighed on spread-sensitive parts of the business like credit and mortgages," said Goldman Sachs chief financial officer Harvey Schwartz."And so it's not surprising that we saw reduced client activity in the quarter."He said volatility in the Chinese stock market since mid-June also had rattled investors.JPMorgan Chase, the biggest US bank by assets, cited Greece as a key factor in a 10 percent decline in bond, foreign exchange and currency trading. Bank of America saw a nine percent drop in this category, while Citigroup's fell one percent. "The quarter was dominated by EMEA (Europe, the Middle East and Africa) with a bond sell-off and economic and political uncertainty, including Greece," said JPMorgan chief financial officer Marianne Lake."This uncertainty slowed the momentum we saw in the first quarter."Bank executives said fewer bank clients are willing to step in and provide key liquidity to facilitate trading.Banks have also cut back on activities following US regulations imposed since the 2008 financial crisis to rein in risk. These include the so-called "Volcker Rule," which takes effect on July 21 and prohibits banks from using their own funds to make some speculative trades.Analysts say bond trading could be especially vulnerable to further pullback in the months ahead due to a plan by the US Federal Reserve to raise zero-level interest rates later this year.- Boost from cost-cutting -Despite the hit from trading, four of five large US banks either met analyst expectations on earnings, or exceeded forecasts, in some cases by a wide margin. The biggest jump came at Citigroup, which reported $4.8 billion in profits, up from just $181 million in the year-ago period. The 2014 quarter had been marred by a $3.7 billion legal charge to settle mortgage securities litigation.The great exception was Goldman Sachs, which saw earnings drop by almost half, to $1.05 billion from $2.04 billion, due to a $1.45 billion legal charge.To boost profits in the wake of the trading pullback, banks are cutting costs and boosting lending to consumers.Citigroup expenses fell 30 percent from the 2014 year-ago period, or seven percent if the effects of huge legal costs were excluded. Bank of America's expenses fell 25 percent, or six percent if its large 2014 legal charge is excluded.Banks have eliminated thousands of jobs, shuttered bank branches and exited non-strategic ventures. Citigroup said it has reduced its North American branch count by 15 percent over the last year.With the exception of Goldman Sachs, large banks "seem to be putting the period of large litigation charges behind them," said a note from Zacks Equity Research. "Underlying loan demand is improving, as is the outlook for investment banking, with momentum on the advisory side of the business helping offset weakness on the fixed-income trading side," Zacks said. "These modest improvements in business coupled with tight cost controls should keep bank profits in the positive column in an otherwise very unhelpful interest rate backdrop."JPMorgan, BofA and Citigroup reported increases in some key consumer lending categories, or, in some cases, gains among the company's core clients.Lending to consumers is expected to become more profitable for banks in a rising interest-rate environment.Large banks currently pay near-zero interest on money they borrow and then charge clients two-three percent, a gap known as the net interest margin.A move by the Fed to lift rates to 0.25-0.50 percent could permit banks to charge four-five percent on lenders, said Gregori Volokhine, president of Meeschaert Capital Markets.Join the conversation about this story »
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As part of a deal to secure new funding, Athens had to surrender much autonomy over its economy and this will include handing over more power to European institutions to decide the fate of its sick banks. Only Alpha Bank was given an entirely clean bill of health.
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Despite all of the headlines about a banking crisis in Greece, Europe is home to the world’s safest commercial banks, according to a report by Global Finance Magazine. The study compares 500 of the world's largest banks and their "long-term foreign currency ratings" issued by Fitch, S&P, and Moody's as of August 2014. The banks are then given a score where 10 points are awarded for a AAA rating, 9 points for AA+ rating, and so on, according to Andrew Cunningham, project coordinator for Global Finance Magazine. The ranking does not include banks owned by other banks and government import-export finance institutions. SEE ALSO: JPMorgan's ultimate guide to the markets and the economy 17. National Australia Bank Country: Australia Assets: $752,585,000 Fitch: AA- Moody's: Aa2 S&P: AA- Global Finance ranking score: 22 Source: Global Finance Magazine 16. Royal Bank of Canada Country: Canada Assets: $823,278,000 Fitch: AA Moody's: Aa3 S&P: AA- Global Finance ranking score: 22 Source: Global Finance Magazine 15. Rabobank Country: Netherlands Assets: $929,719,000 Fitch: AA- Moody's: Aa2 S&P: AA- Global Finance ranking score: 22 Source: Global Finance Magazine See the rest of the story at Business Insider
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Are Greece’s banks close to collapse?
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