Greek banks, restructured and well capitalized
The recapitalization, consolidation and reform of the banking sector has seen short-term obstacles, but the picture is becoming increasingly positive
The Greek banking sector has totally transformed as a result of the financial crisis. Legislation, restructuring and recapitalization have led to a sector that is now internationally recognized for its high capitalization levels and for substantial improvements in stability, governance and transparency. As Professor Nikolaos Karamouzis, Chairman of EFG Eurobank and Chairman of the Hellenic Bank Association, states, “we have been through four stress tests – no other system has been stressed as much.”
Consolidation from about 60 banks has resulted in four systemic banks – National Bank of Greece (NBG), Alpha Bank, Eurobank and Piraeus Bank – and a few non-systemic ones, the biggest being Attica Bank. Despite the disruption, George Handjinicolaou, Chairman of Piraeus Bank, says that “the banks have managed to sustain themselves, stand on their feet and they are gradually registering profits.”
But while it’s made advances, the sector still has problems. “The question of non-performing loans in the Greek banking system is a crucial one,” says Attica Bank Chairman, Panagiotis Roumeliotis. The government has introduced a new legal framework to reduce this, “which allows the sale of loans, out-of-court settlements, faster loan restructuring, the formation of specialist NPL management companies and simpler bankruptcies, amongst other things,” says Panayotis Thomopoulos, Chairman of NBG.
“The question of non-performing loans in the Greek banking system is a crucial one”.
Panagiotis Roumeliotis, Chairman, Attica Bank
About €30-35 billion is tied up in the large NPLs of some 100 companies, who are on the books of all the systemic banks. The Hellenic Financial Stability Fund (HFSF), which manages the state’s bank shareholdings, is stepping in here by getting banks “to sit down together and facilitating an optimum resolution – for every case, every loan,” says George Michelis, the fund’s Chairman.
In a first for the country, Attica Bank recently securitized €1.3 billion of its bad loans. A move that could be copied by others and which its Chairman, Panagiotis Roumeliotis, says will make it “one of the healthiest banks in Greece.” Initiatives like this mean that the country’s targets for reducing NPLs are being met or exceeded.
Another big challenge is recovery of deposits, which flew out of the country until restrictions were put in place in 2015. Since then, €8.5 billion has been repatriated. Alpha Bank Chairman Professor Vassilis Rapanos thinks it’s “important to lift capital control measures to restart confidence.” All banks are calling for Greece to enter the European Central Bank’s quantitative easing scheme quickly, so that the country can reenter international finance markets. In the meantime, they are increasing foreign investor confidence by improving their internal management, efficiency, profitability, corporate governance and transparency.
Unlike the subprime banking crisis of other countries, the crisis in Greece wasn’t due to any particular problem in the sector. Rather, it was a consequence of the Greek sovereign debt crisis that created contagion. Coming out of that crisis, though, the sector has been transformed.
Greece’s banking sector in numbers
- Following consolidation and the resolution of 14 credit institutions, the sector comprises 4 systemic banks and several smaller, nonsystemic banks.
- The 4 systemic banks have undergone 4 stress tests and 3 rounds of recapitalization since 2010, for close to €65 billion.
- HFSF manages the state’s bank shareholdings: 40% of NBG, 26% of Piraeus Bank, 11% of Alpha Bank and 2% of Eurobank.
- Greece has about 10% of the EU’s total NPEs (based on FY16 data), representing 45% of total domestic loans, or €105 billion.
- The ECB has set targets for the Greek banking system to reduce NPE volume to €67 billion, by the end of 2019.
- Capital ratio is amongst the highest in Europe (aggregate CET1 around 16% in 2016), comfortably above the EU average of 13.6%.
- Between June 2015 and February 2017, €8.5 billion of funds that had moved abroad, have been repatriated.