Fitch: Greek depositors will possibly avoid a haircut when Greece will have to implement the BRRD

Greek depositors will possibly avoid a haircut when Greece will have to implement the Bank Recovery and Resolution Directive (BRRD), Fitch Ratings said in a report on Wednesday, warning however that this will only happen if the directive is imposed by the end of the year.

Greece approved the BRRD legislation on July 22.

“It is likely the relevant authorities will try to exercise available discretion within the Bank Recovery and Resolution Directive (BRRD) to avoid imposing losses on some creditors of Greek banks, particularly depositors,” the agency said. “Discretion may be more limited from 2016, when the BRRD and the EC’s Single Resolution Mechanism come fully into effect, so whatever treatment is applied to Greek banks may not establish a precedent for how BRRD will be applied in other countries,” it added.

Under the 86-billion-euro bailout agreement between Greece and its European creditors reached on August, 25 billion has been earmarked to recapitalize the banking sector and address resolution costs.

Fitch also said that the objective of BRRD is to minimise the cost of bank failures to the state and taxpayers but it recognises that there are still some limited circumstances under which authorities may provide support instead of imposing losses in full on private creditors.