Greek banks face burden of new NPLs up to 10 billion euros, BoG governor says

Greek banks will face a burden of new non-performing loans of 8-10 billion euros from the pandemic crisis, relatively greater compared with the burden facing other European credit institutions, Bank of Greece Governor Yannis Stournaras said.

Addressing the 8th Banking Forum, Stournaras said that Greek banks, already burdened with a high stock of NPLs, will face an even bigger burden in the future since they have exhausted the greater part – if not the entirety of – their capital reserves to deal with their huge stock of NPLs.

The central banker noted that despite the fact that Greek banks have managed to reduce their NPLs by around 50 billion euros since their peak in March 2016, they remained at very high levels (35.8 pct in September 2020), significantly above the EU average.

Stournaras stressed that Greek banks enjoy a satisfactory capital adequacy rate; however, this will be negatively affected by expected developments such as the implementation of the IFRS9 standards, the cost of securitizations of NPLs and a low quality of capital. For these reasons, Stournaras reiterated the need for the creation of a so-called “bad bank”, to operate in parallel with a state guarantee “Hercules” scheme.

His proposal he said would deal with the problem of referred taxation as well and could lead to a further reduction of NPLs by 40 billion euros. He asserted that the cost of this “bad ban” will be covered exclusively by banks.