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27/12/2012 - Report on the recapitalisation and restructuring of the Greek banking sector

The Greek banking sector was severely hit over the past few years by the combined effects of the restructuring of Greek sovereign debt and adverse economic conditions, both of which affected banking assets and deposits.

The report published today results from the requirements set in the Memorandum of Understanding. In this report, the European Commission, the European Central Bank and the International Monetary Fund provided guidance and ensured the consistency with the programme’s objectives.

The Bank of Greece carried out a conservative assessment of the capital needs of the Greek banking sector over the period 2012-2014. The report on the “Recapitalisation and Restructuring of the Greek Banking Sector” describes the impact on the capital needs of banks stemming from (i) the restructuring of the Greek sovereign debt (PSI), (ii) the credit loss projections of the domestic loan portfolios of Greek commercial banks over the three-year horizon 2012-2014, as independently estimated by BlackRock Solutions, (iii) the credit loss projections resulting from foreign and state-related loans and (iv) the expected internal capital generation, on the basis of a conservative approach to the Business Plans submitted by banks to the Bank of Greece in the first quarter of 2012.

In addition, the report includes the estimate of the Financial Envelope required to cover the recapitalisation and restructuring needs of the Greek banking sector. In February 2012, an amount of €50 billion was earmarked to cover the respective needs. In December 2012, the Bank of Greece updated this estimate and confirmed its adequacy in light of the latest developments.

The main objective of the comprehensive banking sector strategy is to secure a well-capitalised and viable banking sector. The aim is to gradually restore depositors and market confidence. The improvement in the capital and the liquidity position of Greek banks will enable them, in the medium term, to perform their core intermediating function and thus to help improve the business environment and put the real economy back into a sustainable path.

The documents posted include:

1. The report on the recapitalization and restructuring of the Greek Banking Sector in English.

2. The first chapter of the Report (Overview) in Greek.

3. The methodology of the Diagnostic Assessment of the Greek Banking Sector by BlackRock Solutions in English.