The tests had more positive effects for the Greek banking system than anticipated, since all four of them have been found having adequate funding, with very few needs for recapitalization.
The National Bank of Greece was found in need of 930 million euros worth of additional funding. Under the bank’s restructuring plan, its actual needs are up to 273.28 million euros, an ammount which will be secured by the sale of shares of NBG’s Turkish asset, Finansbank.
Eurobank’s capital needs were found at 1.76 billion euros, based on figures from 2013. Under the bank’s functioning restructuring plan, the amount needed is just 70.6 million euros.
According to the stress tests, Piraeus Bank was borderline around the limit set by ECB with a need of 655.99 million euros worth of additional funding. These figures are also based on 2013 figures and the bank’s current restructural plan covers this amount in its entirety.
Alpha Bank was found with zero funding needs by the stress tests announced today by EBA.
Under a European Bank Authority healthcheck, 24 banks fell short of a target to hold common equity of 5.5% or more of their risk-weighted assets under a stressed 3-year recession scenario, based on their balance sheets at the end of 2013. Any bank falling short of that level needs to take action to get to that target, and the EBA said 14 banks still had work to do at the end of September 2014.
Another bank, Spain’s Liberbank, narrowly passed the EBA’s target but its capital starting point was deemed to have been below a target set by the European Central Bank for banks in the euro zone.
BANK OF GREECE RESPONSE
Right after the official release of the ECB stress tests, the Bank of Greece issued a press release, confirming the satisfaction of the Greek banking system from the results. Here’s the statement:
Three of the four Greek credit institutions that took part in the Comprehensive Assessment have no capital shortfall under the relevant dynamic balance sheet assumption and the fourth bank has practically no shortfall.
Under the static balance sheet assumption, Alpha Bank S.A., has no capital shortfall, while Piraeus Bank S.A. has a capital shortfall that is more than covered by the capital raising performed in 2014 (net of repayment of preference shares). Under the static balance sheet assumption, National Bank of Greece S.A. and Eurobank Ergasias S.A. have a capital shortfall that is not fully covered by the share capital increases performed in 2014. However, as stated in the aggregate report on the Comprehensive Assessment: “[these] banks … will have dynamic balance sheet projections (which have been performed alongside the static balance sheet assessment as restructuring plans were agreed with DG-COMP after 1 January 2014) taken into account by the JSTs in determining their final capital requirements. Under the dynamic balance sheet assumption, one bank (National Bank of Greece S.A.) has no shortfall and one bank (Eurobank Ergasias S.A.) has practically no shortfall”.
The results of this exercise provide confirmation that the capital raising and restructuring plans implemented by the four Greek banks have significantly strengthened their capital positions.