Greek banks are among Europe’s strongest performers in reducing credit risk costs, although their levels remain among the highest on the continent, according to an analysis by Morningstar DBRS warning that renewed interest rate pressures could test lenders over the next 12 to 18 months.

Greece, Italy, Spain and Portugal have recorded the sharpest reductions since 2024, continuing a trend that began in 2022, the agency reported this week.

The average European banking sector cost of credit risk fell to 25 basis points in the first half of 2026, from 30 basis points in 2025, 28 in 2024, 36 in 2023 and 49 in 2019.

Among Greece’s four largest banks, the National Bank of Greece recorded the lowest credit risk cost, followed by Piraeus, Eurobank and Alpha Bank.

Despite the improvement, Greek and Spanish banks continue to report the highest aggregate credit risk costs among the countries examined, followed by British and French lenders.

The analysis found signs of a possible reversal, with 29 of the 53 banks in its sample reporting higher credit risk costs in the first half of 2026 than in 2025, while only six recorded net reversals of provisions.

Credit costs continue to decline in southern Europe and Ireland, but have started rising in northern and central Europe, including Britain, France, the Netherlands and Sweden.

In Austria and Belgium, credit risk costs almost doubled in the first half of 2026 compared with 2025, although the Austrian increase was largely attributed to Erste and changes to provisioning models following its acquisition of Santander Polska.

Morningstar DBRS said the deterioration in asset quality expected after the 2022-2023 interest rate increases had not materialised, with credit losses remaining limited even after the European Central Bank’s key rate peaked at 4 per cent.

It attributed this resilience to stronger bank balance sheets, tighter lending standards, lower household borrowing and robust employment, while pressure was concentrated in commercial property, highly indebted businesses and selected sectors.

However, the agency expects credit risk costs to rise moderately over the next 12 to 18 months amid renewed interest rate and inflation pressures, geopolitical uncertainty, potential energy supply disruptions linked to the Middle East and slower economic activity.

European banks are considered sufficiently capitalised, liquid and profitable to absorb a potential increase in credit losses, but Greek lenders face the challenge of continuing to converge towards lower European credit risk levels.