Greek banks downplay stress test failure amid capital-boost effort

Jul 15, 2011, 18:01 GMT

Athens - Two Greek banks that failed European bank stress tests designed to assess whether they could survive another economic crisis Friday said they were in better financial health than suggested by the test results.

Eurobank EFG, whose core capital ratio was found to be 4.9 per cent - just below the needed 5-per-cent target - complained that its 'generic provisions' and planned capital-enhancing actions had not been taken into account.

The ratio rises to 7.6 per cent if 'the actions that have already been decided, announced and are already being implemented' are taken into account, the bank said in a statement.

It noted that the international financial support that Greece has received - a second multi-billion-euro bailout is currently being crafted by the European Union and International Monetary Fund - would 'reinforce financial stability.'

The second bank that failed the tests, ATEbank, struck a slightly less optimistic note after being found to have a core capital ratio of -0.8 per cent, amounting to a shortfall of 713 million euros (1 billion dollars).

'The basic reason leading to this shortfall is the significant exposure of the bank to Greek sovereign bonds and loans,' it said. 'ATEbank, under an adverse scenario regarding the evolution of the Greek economy ... will be the (Greek) bank influenced the most.'

It said, however, that the stress tests did not take into account its 750 million euros' worth of generic provisions and an upcoming bond issue, which would push the ratio up to 6 per cent.

The bank is additionally in the midst of an EU-approved restructuring programme.

'ATEbank has taken all the necessary measures and has proceeded with all the needed actions to safeguard against potential risks,' it concluded.

George Provopoulos, the governor of Greece's central bank, told the state broadcaster that he found the capital-boosting measures undertaken by the two banks to be 'encouraging.'

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