The management of non-performing loans with social sensitivity, a return of deposits, funding the real economy, new technologies that radically change the way banks operate, are among the 14 challenges facing the Greek banking system in the next few years.
According to a study by Hellenic Bank Association (HBA) the 14 challenges are the following:
1. The restructuring of banking portfolio through a more efficient resolution of the problem of non-performing loans with social sensitivity and improving the institutional framework for the restructuring of NPLs.
2. Finding ways to restart the investment process and return to growth.
3. Maintaining the reduction trend of Greek banks’ dependence on state aid and the Eurosystem until their redemption and full repayment, respectively.
4. The consistent implementation and application of restructuring plans of Greek banks.
5. Increasing the rate of deposits return to the Greek banking system by focusing on domestic cash, which remain outside the system, and deposits abroad with negative returns.
6. Deferred tax liabilities, which are considered by the supervisory authorities and in some cases by the markets, as of lower quality capital, as their recoverability is related with bank profitability.
7. The IFRS 9, which will be implemented from 2018 and will replace the loss model (incurred loss model) to the expected loss model, will result in higher provisions with all negative consequences that entails for the capital adequacy of banks.
8. The introduction of the “minimum requirement for own funds and eligible liabilities’, known as MREL, through which it seeks to ensure that banks have sufficient obligations with the opportunity of absorbing losses in case of reorganization (resolution), in order to be able to face banking crises in the future, to maintain banking stability and to minimize the burden on taxpayers.
9. The new requirement MREL implies the need for banks to issue new eligible liabilities, mainly senior bonds, with cost that banks will have to incorporate in their business model.
10. New technologies will radically change the banking system, both in terms of providing services to bank customers and in relation to the introduction of new business models that will complement or, possibly, will completely replace traditional banking.
11. Restoring confidence in the Greek economy from the perspective of citizens, markets and partners.
12. The positive credit growth, though a necessary condition for sustainable economic development, will follow and not precede the economic recovery.
13. In the area of corporate governance, changes in the ownership structure of Greek banks after the recent recapitalization, with foreign institutional investors holding significant equity rates, as well as recent changes of legal and supervisory nature, brought about significant changes in banks’ Boards of Directors, posing another challenge for the Greek banking system.
14. Further expansion of the shareholder base to private investors, foreign portfolios but also Greek, whose participation significantly decreased in recent years due to recapitalizations.