IMF On Greek Banks
The IMF’s interim report on the fiscal adjustment course of the Greek economy offered positive signals for the Greek banks.
The fund notes that liquidity conditions are tight as banks face difficulties in renewing liabilities as market confidence has not yet been restored and spreads have not yet resumed their downward trend. Nevertheless, the approval of a banking support package for €15billion in additional guarantees in May and continued ECB liquidity assistance have bolstered the resistance of the banking system.
It says the banks’ solvency buffers remain adequate, with some erosion. As expected, the quality of banks’ loan portfolios declined slowly with the economic downturn. NPLs increased from 7.7 percent of total loans in December 2009 to 8.2 percent as of end-March 2010 and the NPL coverage ratio with provisions has dropped. The system-wide capital adequacy ratio declined from 13.2 percent in December 2009 to 12.9 percent as of end-March 2010, as foreseen, but remains well above the 8 percent regulatory minimum.
Partial data available for April and May 2010 indicate further slippage, with some differentiation among banks. Although banks’ pre-provisioning operating income has remained stable at elevated levels, the need for larger provisions against NPLs has driven the banking system as a whole into a loss after including provisioning and taxes.
(Capital.gr)
