Greek bankers told Capital.gr that on the one hand European politicians are trying to justify a new Greek aid to their voters, while on the other hand the European Central Bank premises the health of the European financial system and fortifies in order to avoid a possible bailout of a European Bank.
In this context, the Greek Banks’ access to the international markets will be determined only by the strict implementation of Greek government program.
Bankers point out that despite the extremely limited liquidity, the Greek banking system is still alive, with the sole risk being political. In this context, they note, neither ECB’s tough stance, nor a new downgrade of Greece’s credit ratings by Fitch will have further impact on Greek banks.
They state that a debt reprofiling would be positive for banks as opposed to the solution of a “haircut”. Based on analysts’ estimates, a “haircut” of 50% in government bonds could reduce banks’ capital to just €4b, forcing them to emerge capital increase of over €10b.
However, ECB is against a debt reprofiling, as central bankers consider it safer if the debt is normally paid to the bondholders.
In this context, bankers expect that ECB would ask from European banks which hold Greek debt (and periphery bonds) to form increased provisions for potential losses in the current and next fiscal year in the case of an unavoidable haircut. These losses will be limited as the maturity of Greek bonds will be repaid in full, while the banks’ exposure in Greek debt would be reduced. According to sources, Deutsche Bank has already decided to proceed with forming of increased provisions.
The impact of a possible haircut of 50% to Greek and Cypriot banks could be reduced to 25% if it is done in mid-2013. According to JP Morgan, Greek and Cypriot banks would hold only €25b in government bonds by then, and their losses would estimated at €12.5b.
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