Greek banks face €14.4bn capital shortfall

The European Central Bank on Saturday said four major Greek banks would have a capital shortfall of up to 14.4 billion euros ($15.8 billion) if the economy took a turn for the worse.

And the ECB said it had given the four banks concerned -- Alpha Bank, Eurobank, NBG and Piraeus Bank -- until November 6 to submit plans explaining how they intend to make up that shortfall.

A key financial health check known as a "comprehensive assessment" conducted by the ECB's banking supervision department identified a capital shortfall of 4.4 billion euros under a baseline scenario and 14.4 billion euros in an adverse scenario, the ECB said in a statement.

The health check comprises an asset quality review and a forward-looking stress test aimed at assessing "the specific recapitalisation needs of the individual banks" under Greece's current economic adjustment programme, the statement explained.

"Overall, the stress test identified a capital shortfall across the four participating banks of 4.4 billion euros under the baseline scenario and 14.4 billion euros under the adverse scenario," the ECB said.

"The four banks will have to submit capital plans explaining how they intend to cover their shortfalls by November 6," it said.

"This will start a recapitalisation process under the economic adjustment programme that must conclude before the end of the year."

Covering the shortfalls by raising capital would "result in the creation of prudential buffers at the four Greek banks, which will improve the resilience of their balance sheets and their capacity to withstand potential adverse macroeconomic shock," the ECB added.
Source: AFP