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The banking sector will continue to shrink until 2017

23 September 2013 / 14:09:31  GRReporter
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Banks’ teams are working day and night to meet the requirements of the Directorate General for Competition (DG Comp) of the European Commission, the Bank of Greece and the financial stability fund, and to submit the restructuring plans for the period 2014-2017 by 30 September.
As announced by the financial stability fund, DG Comp and the four systemic banks in the presence of representatives of the fund and the Ministry of Finance have already completed the cycle of the meetings. Significant progress has been achieved during the meetings regarding the commitments of the banks to the Competition Commission in relation to the implementation of the restructuring plans. According to the message of the financial stability fund, the procedure for the approval of the plans by the Competition Commission will follow the implementation of the planned stress tests of the banks.

As is clear from the meetings with Deputy Director General of DG Comp Gert - Jan Koopman held on Thursday and Friday, the restructuring plans of the banks will be followed by negotiations between the banks’ management bodies and the European Commission in order for them to finalize the plans. It is expected that this will happen by mid-October.


Banking officials stress that the meetings took place in a very good atmosphere and the two sides are close to signing a final agreement with respect to the actions to be implemented both in Greece and abroad. According to some sources, the National Bank is under pressure to sell assets on a mass scale in order for it to improve its capital position. Sources from the National Bank have refuted this information, stressing that the meeting with Gert - Jan Koopman took place in a very good atmosphere and that the main activities of the programme have been already agreed.

The programmes which will last 5 years, from 30 September 2013 to 30 September 2017, should include specific actions to strengthen the capital base and reduce the dependence of the banks on the European system in terms of liquidity.

In compliance with a requirement of the European Central Bank, the Greek banks will have to limit the liquidity they obtain from the European system to 15 % of their assets not later than September 2017. So far, the banks have obtained from the European system liquidity amounting to 62 billion euro. According to sources, two of the banks have already fulfilled this obligation and the rest are also moving in the right direction.

As claimed by banking professionals, it will be relatively easy to achieve this goal because its implementation will require reducing the dependence on the European system by about 7 billion euro. The estimates of the Bank of Greece show that, through the restructuring plans, the local banks could save capital to the amount of 6 billion euro over the coming years. In particular, it is estimated that about 3.5 billion euro could be saved from the sale of non-banking activities and that another 2.5 billion euro would come from the collaboration as a result of the completed mergers.

The assets to be sold in the coming months include hotels such as "Asteras" in Vouliagmeni (the National Bank), "Hilton" - Athens (Alpha Bank), insurance companies (the National Insurance Company) as well as a number of properties owned by the banks. Over the next 5 years the banking system will derive numerous benefits from the cooperation as a result of the completed mergers. Let us recall that over the past two years a total of 11 banks have disappeared from the map of banks in Greece and have passed under the control of the four systemic banks. Over time, the banks will save about 2.5 billion euro by reducing staff, the network of branches and mainly by reducing the cost of cash resources which has already started. Regarding the network of branches, the aim of the banks is to cut their number by 800 -1,000 by the end of 2017. The number of employees in the banking system will be reduced by nearly 20% which means about 9,000 jobs less.

New capital requirements will give rise to complications

The results of the stress tests will largely determine the future of the banks. Their management bodies and the Greek government are anxiously anticipating the results of the exercise, as there will be serious complications in the case of new capital requirements. Sources indicate that a new legislative framework will be required in the event of similar developments. In addition, if a bank, which has concentrated 10% of the participation of individuals in equity, needs capital, this will further reduce the involvement of individuals and the probability of exercising the warrants will recede. However, banking officials are optimistic that no additional capital will be required as the economic conditions in the country are improving.

Tags: Banking systemStress testsEuropean CommissionFinancial stability fund
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