BANK OF GREECE

Staikouras: "Reduce profitability, strengthen households and businesses". "Let us do our job", the banks reply. Government-bank relations are in the red. SSM on alert.

According to Business Daily sources, official sector creditors have asked all debt management companies for detailed information on the impact on business plans and revenue flow from recoveries due to the legal obstacle that has emerged, as well as estimates on the impact on payment culture and the desire from debtors to move ahead with restructuring of debt.

Bids from investment banks to act as advisors to the HFSF in the sale of bank shares will be made within days. Before the end of the year, the tender to define the disinvestment strategy will be completed.

These transactions, along with some other smaller ones, will complete the consolidation of banks' loan portfolios, leading the entire banking system to a single-digit non-performing loan ratio, even below 5% for some banks. The ultimate goal of lenders is for NPEs to be close to 3%, which is the EU average.

The latest report from the Bank of Greece (BoG) on Financial Stability highlights that fraudsters prefer transactions with credit transfers which increased 300% in 2020, in relation to 2019.

Although many companies are now able to move ahead with investments to improve their business, many are still moving defensively, keeping deposits high as they remain concerned about the duration and resilience of the current economic upturn.

The trend of continuous increases in deposits reflects growing confidence in the Greek financial system, however, doubts remain about the course of the pandemic and the implementation of new restrictive measures.

As the BoG stated in its latest Monetary Policy Report, the primary deficit in terms of enhanced supervision was projected to fall to 3.9% of GDP this year from 7% of GDP in 2020.

In the second quarter of 2021, the credit standards for loans to non-financial corporations (NFCs) remained unchanged compared with the first quarter of 2021, in line with the expectations expressed in the previous quarterly survey round.

Credit risks are expected to increase in the near future, exposing banks to the formation of high-end provisions that will hurt their results, at a time when they need internal capital formation to deal with losses from loan securitizations.