All eyes on Greek banking system
(27 May 2015 – Greece) The European Commission is reportedly preparing contingency plans in the event the Greek banking system suffers further following the nation’s prediction it will not meet its June debt payment to the International Monetary Fund (IMF).
Greece’s four largest banks, including the National Bank of Greece SA and Alpha Bank AE have all received notifications from independent auditors questioning whether they can continue as so-called going concerns, according to earnings reports.
The financial firms have suffered after the economy in Greece contracted for six straight years, a 2012 debt exchange forced the institutions to take large losses and the prolonged recession led to an increase in non-performing loans.
On 22 May German Chancellor Angela Merkel said greater efforts were required by Greece to meet an accord with creditors to unlock the remaining €7.2 billion (A$10.1 billion) of its bailout funds.
The banks themselves have warned investors, with the National Bank of Greece signalling it faces restrictions in accessing the capital markets and is dependent on the European Central Bank (ECB) and the Bank of Greece for funding, according to its 18 May filing.
The National Bank of Greece’s “ability to continue to access sufficient liquidity through emergency liquidity assistance facility as well as the significant deposits outflow between 1 January, 2015, and 30 April, 2015, raise substantial doubt about its ability to continue as a going concern,” the firm’s auditors wrote in the filing to the United States Securities and Exchange Commission.
Euro-area nations are still debating on when and how to extend further bailout aid to Greece, the country’s banks have helped the government keep afloat as well as emergency aid from the ECB.
ECB Supervisory Board chair Daniele Nouy said on 13 May that Greece’s banks are solvent and had never been better equipped to go through this kind of stressful situation.
Greece’s bailout program does have money set aside to help the banks if creditors are willing to release the funds, with 10.9 billion in bonds parked at the European Financial Stability Facility, returned from Greece’s bank-rescue fund as a condition of its February bailout extension.
This money can only be used for the recapitalisations of financial firms and only if the ECB requests it before the bailout program expires at the end of June.
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