They can bear the “haircut”, but what about precarity?

The banking system was given a great breath of fresh air after the European leader settlement on the debt crisis, including an agreement on the participation of individuals.

According to the first evaluation, without calculating the accounting cost of bank participation, the banking system seems to be able to bear the incurred cost, either through increases in share capital or liquidation of assets, or a combination of both.

A haircut of around 15% had been assumed during the stress tests of the total of the Greek risk held by Greek banks, including that of treasury bills, thus taking into account the treasury bills, the public sector bonds and the issued preference shares of the public sector in each bank.

These are not included in the program of private entity participation, and thus the amount of bonds to be included in the process is less than that calculated in the stress tests, meaning that the basis for calculating incidence is lower than the baseline. That is, although the exact calculations for each bank are unavailable, a primary conclusion is that the prerequisite funds will not be too high and therefore can be met, and therefore banks move further away from nationalization.

It also seems that the real impact will be much less than 20%, and it is estimated that depending on the method of participation,  such an impact will not exceed 15%, which was the assumption of the stress tests.

The EFSF guarantees provide the necessary liquidity to the system, removing any fears that the crisis could have caused in terms of bank deposits. But said banks are still kept outside the markets, which will remain closed for some time.

Despite the breath of fresh air, banks did not solve their problems. However, the improved mood and climate make it easier for them to move ahead with their capital reinforcement and plan new moves to cover the additional capital needs.

However, bankers know that the coming months will be difficult. According to information, the Bank of Greece is already moving ahead with hiring an independent consultant who will take over control of the bad debts in the loan portfolio of each bank, so as to evaluate the actual banking needs and make predictions about any additional capital required.

According to the schedule, this is expected to begin in September.

The question of control, and especially the recruitment of an external independent consultant, caused the banks to react, claiming that it must not be carried out through a private individual who, as an adviser, would gain access to detailed information about the quality of the loan portfolios of the entire system, but instead should be pursued through official procedures.