ECB may bring forward Greek bank stress test next year

26 September 2017
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The European Central Bank may bring forward its stress test of Greek banks next year, finalising data well before Greece is due to exit its three-year, 86 billion euro international bailout.

A source told Reuters on Monday the test could be finalised in early May to ensure there would be plenty of time before the end of the bailout in August to recapitalise banks, should the exercise uncover any capital shortfall.

The International Monetary Fund has been pushing for a fresh asset quality check at Greek banks, possibly as part of a bailout review that is slated to start soon, a suggestion the ECB, which supervises top Greek banks, has firmly rejected.

But ECB President Mario Draghi, speaking to members of the European Parliament, hinted on Monday that the ECB is willing to exercise some flexibility with its timeline.

“The SSM (Single Supervisory Mechanism) will take its decision with full independence,” Draghi said.

“What the SSM plans to do next year is to have a stress test, possibly frontloading the stress test, and basically the SSM sent a letter to the IMF concerning exactly this expected line of action,” Draghi said.

The source added that the ECB’s supervisory arm has not made a decision.

Although no timeline has been published for EU-wide 2018 stress test, the last exercise was completed in late July. A similar end date for Greek banks this year would not leave enough time to fix potential problems.

Greek banks have been recapitalised three times since the debt crisis exploded in 2010 but are still burdened by 100-plus billion euros of soured debt.

Greece and its lenders hope that full market access will have been restored by the programme’s end next August so Greece will not need a fourth bailout and will be in a position to rely on market financing.

Source: Reuters

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