The assessment report on the assets of Greek banks should be completed in the fall in spite of this month’s snap polls, Dutch Finance Minister and Eurogroup head Jeroen Dijsselbloem estimates, while Fitch Ratings says that should make it easier for banks to meet the deadline for their recapitalization without being subject to a haircut on deposits.
In a document submitted on Wednesday to the Dutch Parliament, Dijsselbloem argues that the Greek elections will not delay the process of evaluating the Greek lenders’ loan portfolios or their recapitalization, which must be completed by the end of 2015.
Sticking to the agreed timetable will reduce the possibility of a deposit haircut, added Fitch, before warning that any delay could trigger the full implementation of the Bank Recovery and Resolution Directive (BRRD), with the activation of the Single Resolution Mechanism in early 2016, likely limiting the Greek authorities’ scope of action.
In its report issued yesterday, Fitch also puts the level of the local credit sector’s capital requirements at between 7.2 and 15.1 billion euros, depending on the minimum capital adequacy ratio requirement, which could range from 10 to 14 percent.
The baseline scenario, used by the European Banking Authority (EBA), provides for capital requirements of 11.2 billion euros for domestic lenders, and is based on the inclusion of the deferred tax assets as a part of the banks’ capital, which in turn would ease the pressure on the local system. According to that scenario, Greek banks’ bad-loan portfolio could increase by 24 billion euros to total 52 percent of the entire loan portfolio, compared with 40 percent today. The same scenario provides for the coverage rate of nonperforming loans to grow to 60 percent, while the value of state bonds will be adjusted by 20 percent.
Fitch went on to underscore that any bail-in process will exempt small depositors as the Eurogroup has clearly announced, while the Greek bank bonds that may be involved in a bail-in add up to just 4.7 billion euros, which should be quite easy for the system to absorb.