The European Central Bank’s health check of Greece’s four big banks will show a total capital shortfall of up to 14 billion euros if economic conditions become ‘adverse’, two banking sources told Reuters on Thursday.
The ECB’s Single Supervisory Mechanism (SSM) is assessing the capital needs of National Bank of Greece, Piraeus , Alpha Bank and Eurobank. Results will be released on Saturday.
The ECB’s so-called comprehensive assessment of the banks’ books included a scrutiny of their loan portfolios and stress tests carried out using baseline and more adverse scenarios for the course of the Greek economy to project possible credit losses up to 2017.
Under the baseline scenario, the stress test will show a capital gap of about 4.5 billion euros for the four banks, one of the sources said. Factoring in the adverse scenario, it could be as high as about 14 billion.
Greece’s Deputy Prime Minister Yannis Dragasakis told the country’s president he expected a planned recapitalisation of banks to be successful.
“All preconditions are there for a successful conclusion of the process,” Dragasakis told Prokopis Pavlopoulos.
Dragasakis said parliament would vote on Sunday on the leftwing government’s recapitalisation law, which will outline how new capital will be pumped into the banks.
Banks will tap private investors to cover the capital shortfall.
Greece’s HFSF bank bailout fund will plug any capital gap beyond the baseline scenario if it cannot be raised in the market, by buying a mix of new shares and contingent convertible bonds that banks will issue.
Dragasakis said the new shares will have full voting rights.
Under an international bailout agreed last summer, Athens can receive up to 25 billion euros of public money to recapitalise its ailing banks.