Bank restructuring plan check to be a mere formality

National Bank, Piraeus and Eurobank have submitted their restructuring plans to the European Central Bank for approval, but their examination by Frankfurt will be mostly academic.

As the ECB had stressed during the presentation of its stress test results at the end of October, the calculations for the final capital requirements would take into account the European Commission-approved restructuring plans. And thanks to them, Greek lenders are showing no capital deficits. The ECB will examine these plans and have them approved by December 12.

In the case of Piraeus Bank the process is purely academic as the 660-million-euro capital shortfall that the static model pointed to has been covered by the lender’s share capital increase completed last spring. That means the Piraeus Group does not need to take any further action. Meanwhile Alpha Bank, Greece’s fourth systemic lender, was the only one to pass the stress test without any requirements whatsoever based on its 2013 financial figures.

In contrast, National and Eurobank will have to implement the action plans they have agreed with the Commission to cover the capital deficits that the static approach revealed. Even after factoring in the share capital increases of last spring, amounting to 2.5 billion euros and 2.86 billion euros respectively, the two lenders showed a capital shortfall: National has to cover 933 million euros and Eurobank 1.76 billion.

The capital requirements of National and Eurobank are reversed with the dynamic model, which factors in the actions (such as asset sales, nine-month profits etc) that took place after end-2013 and will also be completed in the coming months. When the latter are added to the equation, National not only sees its shortfall vanish, but it also shows into a capital surplus of 2.02 billion euros, the biggest of all four banks. Likewise, Eurobank’s capital deficit shrinks to a negligible 18 million euros.

All four core banks have told the European Commission’s Directorate General for Competition that they will implement the restructuring plans which provide for a significant reduction in their annual costs and have a binding character. National officials note that the nine-month profits of 1.17 billion euros have already covered the requirements.