Executive Summary of the Financial Stability Review: May 2025
15/05/2025 - Press Releases
- Risks to financial stability in Greece are mainly exogenous, stemming from heightened geopolitical tensions and mounting trade protectionism.
- The Greek economy is expected to be impacted mostly indirectly by a potential slowdown in global and European economic growth and weakening investor sentiment.
- In 2024, Greek banks further improved their fundamentals, significantly enhancing their profitability and capital adequacy, while maintaining high liquidity levels and further boosting their asset quality.
The Executive Summary of the Financial Stability Review was posted today on the Bank of Greece website. The Review is published twice a year by the Financial Stability Directorate.
The Review examines developments in the macroeconomic and financial environment, assesses the risks to and the resilience of the banking and insurance sectors, as well as of the other sectors of the Greek financial system, and discusses the functioning of financial market infrastructures (i.e. payment systems, central securities depositories and central counterparties).
The present Financial Stability Review focuses on developments in the banking sector over 2024, and also includes two Special Features:
a) Special Feature I examines the adjustment of the EU macroprudential policy toolkit by the provisions of Directive (EU) 2024/1619 (Capital Requirements Directive VI or “CRD VI”) and Regulation (EU) 2024/1623 (Capital Requirements Regulation III or “CRR III”).
b) Special Feature II examines loan disbursements to natural persons secured by residential real estate for the period 2021-2024, analysing their main features. Credit standards remained prudent throughout the reviewed period and credit institutions have largely complied with macroprudential borrower-based measures, even before they took effect in January 2025.
The strengthening of the Greek banking sector’s resilience is undeniable. In 2024, Greek banking groups posted profits, after tax and discontinued operations, amounting to EUR 4.4 billion, compared with profits of EUR 3.8 billion in 2023. This development was underpinned by an increase in net interest and fee income and a decline in loan-loss provisions, while profitability was adversely affected by higher operating costs.
The capital adequacy ratios of Greek banking groups improved further, mainly through internal capital generation and the issuance of capital instruments. In particular, the Common Equity Tier 1 (CET1) ratio on a consolidated basis increased to 15.9% in December 2024 and the Total Capital Ratio (TCR) to 19.7%, now standing at the same level as the average in the Banking Union (CET1: 15.9% and TCR: 20.0% in December 2024).
Banks’ asset quality improved markedly in 2024, mainly thanks to NPL securitisation. Specifically, the ratio of NPLs to total loans dropped markedly to 3.8% in December 2024 (from 6.7% in December 2023), the lowest level since Greece joined the euro area, converging towards the average in the Banking Union (December 2024: 2.3%).
The outlook for the Greek banking sector remains favourable, being inextricably linked to the country’s positive macroeconomic developments. However, the likely prospect of a slowdown in euro area economic activity, along with a potential abrupt repricing of financial assets worldwide, could have a dampening effect. Therefore, there is no room for complacency, and the combined application of microprudential supervision and macroprudential policy is crucial for safeguarding financial stability.
Link:
Executive Summary of the Financial Stability Review – May 2025