Greek banks to face stress test for downturn

GREEK banks will have to prove they have enough capital to withstand another two years of recession under the “adverse” scenario of stress tests being carried out in Athens, Greece’s central bank governor George Provopoulos said yesterday.

The tests on the country’s four largest banks, all majority owned by Greece’s bank rescue fund the Hellenic Financial Stability Fund, are being carried out to check if this summer’s €28bn (£23.7bn) recapitalisation has left the banks capable of dealing with future shocks.

Greek banks have seen their non-performing loans swell to 28 per cent of their total loan books, as six years of consecutive recession wiped 25 per cent off the country’s output, while Greece’s bailout programme demanded wage cuts and tax hikes.

Greece expects to return to marginal growth in 2014.

“Under the baseline scenario, which represents our forecast and the troika’s forecast, Greece will return to growth in 2014,” Provopoulos said in an interview with Reuters, referring to the European Commission, European Central Bank and International Monetary Fund collectively.

“Under the adverse scenario, growth kicks in in 2016, with small negative growth rates until then.”

Provopoulos said he was “increasingly optimistic” about the future of the eurozone, including Greece, with 2014’s expected return to growth promising a “positive impact on overall confidence” that would boost spending and investment.

Greece may have to agree a third bailout programme because it will not have enough money to meet spending in 2014 and there has been speculation that the cash could come from the bank bailout fund.

“It is imperative that the unused funds amounting to between €8bn to €9bn remain available as a backstop for the banking sector,” said Provopoulos.