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Two hot months are awaiting Greek banks, as Greece's future and the degree of stability of its financial system with it will be decided during this period.

The signing of the bridging agreement has brought some relief in terms of liquidity as deposit outflows have stopped but uncertainty remains.

The agreement for a four-month extension of the bailout does not include a condition to cover the funding gap, unless it is followed by a positive assessment by the lenders with regard to the specifics and implementation of reforms, the result of the agreement being that the state will always be on the edge as far as the payment of obligations is concerned.

In addition, the institutions (the European Central Bank, the European Union and the International Monetary Fund) and the partners (Germany) are highly suspicious regarding the sincerity in the government's intentions to implement the agreed measures.

"For the first time after 2012 the atmosphere is so tense and immediately after the conclusion of an agreement at that", a senior representative of the banking circle stated, not hiding his concern about the risks of a similar situation.

According to the same source, the government is called upon to regain the trust of its partners in the fastest possible way by starting a radical reform in the state and tax system - the areas in which the convergence of positions with the institutions is the greatest.  It is the only way in which Brussels, Frankfurt, New York and Berlin will understand the government requirements if it requests reasonable concessions to cover the financial deficit over the next two months. If it succeeds, the danger will quickly disappear, thus improving the psychological state of depositors and facilitating banks to gradually return to conditions of normality. Otherwise, the stability of the financial system will face a serious challenge, along with the state.

Blow to restructuring plans

Theoretically, the four largest Greek banks have high capital adequacy, thanks to the European Central Bank, following the recent stress tests for European banks.

It must be recalled, however, that only Alpha Bank passed the stress test under the static model, whereas Piraeus Bank passed it having included the latest capital increase. The National Bank and Eurobank passed the test under the dynamic model, i.e. by including the assessments of the impact that the implementation of restructuring plans would have on capital.

The losses registered by the banks in their restructuring plans due to the uncertainty of recent months can now easily be calculated.

It is estimated that, from the beginning of December to the present day, deposit outflows from the Greek banking system have amounted to at least 23 billion euro, their levels reaching their lowest value in 10 years. Moody's believes that it would take 12-18 months for deposits to return, even if there was a new rescue programme for Greece before June.

The dependence on the Emergency Liquidity Assistance ELA has increased to 65 billion euro, which means an increase in the cost of funding of about 700-800 million euro on an annual basis. At the same time, the pace of creation of new bad loans has also significantly increased and it is believed that, during the current quarter, the new bad loans will amount to 1-1.5 billion euro.

Moreover, the intention of the government to proceed to the cancellation of bad mortgage loans will affect not only the culture of payments but it will probably have a direct impact on the capital position of the banking institutions.

It is no coincidence that having noted in its annual report the risks due to uncertainty, the Bank of Greece emphasizes that caution requires maintaining the capital adequacy index at much higher levels than the minimum set by supervisory rules.

"Plan B" to prevent what is planned for this year from failing 

So far, as reported by the online edition Euro2day.gr, the DG "Competition" of the European Commission considers the above situation as an emergency, not requesting changes in the restructuring plans. It only focuses on the actions that are planned to be completed in 2015, the most important of which is the sale of 40% of Finansbank in two stages, an action that is included in the capital plan of the National Bank too (the sale of 26.9%). Accounting for the fact that time has already been wasted, the DG "Competition" can exert pressure to speed up the procedure or to change the plans.

In the event that the state of emergency for the fate of the country ends, the Directorate will discuss with banks the new environment that has formed and changes in the restructuring plans
will follow on that basis.

It is considered as certain that banks will be called upon to deal with the pressure on the net interest margin due to the increase in financing costs,  the accelerated pace of development of new bad loans and the inability to secure funds from the planned new loans.

Some of the pressure could be neutralised through further cuts in operating and wage costs, through simplifying the organisational schemes, another significant reduction in the salaries of senior officials as well as through radical restructuring of the network and staff of banks in the Balkans.

We recall that, in the autumn, Alpha Bank and Piraeus Bank launched new programmes for voluntary leave of staff, thus having a significant buffer because their wage costs this year are 120 million euro lower for the former and 38.5 million euro for the latter.