The FT claims that the IMF has estimated Greek banks’ capital needs at 20 billion euros, a figure almost four times larger than the one the BoG has reportedly arrived at. In addition, the newspaper states that senior troika officials believe the dispute has become so contentious that the IMF is threatening to publish its own estimates if Athens proceeds with the disclosure of its own forecasts.
The FT indicates the ECB has similar estimates to the IMF and has also pushed for Greece to take a closer look at its conclusions ahead of the upcoming eurozone-wide stress test due by the end of the year.
The dispute is most likely related to the methodology and the assumptions behind Greece’s and troika estimates. The BoG figure is probably based on the baseline scenario for the economy, which sees Greek banks returning to profit next year. In contrast, the IMF reportedly believes this scenario is overly optimistic, especially due to the rapidly increasing rate of non-performing loans.
Moreover, the IMF’s estimates are most likely based on the adverse rather than the baseline scenario for the domestic economy. Another grey area is also the handling of restructured loans, particularly regarding their ability to be serviced and the anticipated future net interest income incorporated in banks’ business plans.
National Bank CEO Petros Christodoulou stated in an interview with Reuters on February 19 that banks are relying on the media for clues regarding the stress test results, which put capital needs anywhere between 4.5 billion euros reportedly suggested by Blackrock and the 15 billion apparently mooted by the IMF.
He also stressed that “to the extent that we do not know the results from the Blackrock tests, the Greek banks and the Greek economy are the victims” since “banking is the heart of the economy and if the heart does not supply liquidity to the Greek economy the latter will falter.”
A Finance Ministry official told the FT that if the recap dispute is not resolved during the new round of troika negotiations, which began on Monday, the Blackrock exercise may be set aside, leaving it to be resolved by the ECB stress test. The assumptions and methodology of the ECB’s own stress test have not been clarified yet and are due to be decided in March. The results are expected to be disclosed in the fourth quarter of the year.
Furthermore, Greek banks are reportedly required to cover potential capital needs by the end of November, at a time when the ECB will disclose the results of its Asset Quality Review showing Greek banks could be in a better or worse capital position compared to that indicated by the BoG stress test.
Nevertheless, a scenario of further delay in the disclosure of Greek banks’ capital needs is unlikely to be welcomed by the troika, particularly the IMF. Their initial aim was to reach an agreement on all pending issues, including the bank recap, to conclude the drawn-out current review. An agreement with Greek authorities would lead to the disbursement of 8.8 billion euros, comprising the tranches for the last quarter of 2013 (3.1 billion) and the first quarter of this year (5.7 billion) from the eurozone.
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