Greek banks left to the hands of fate

Financial Times
July 3, 2011

“What the Greek banking system needs is tranquillity,” says Nikos Karamouzis, deputy chief executive officer of EFG Eurobank, Greece’s second-largest bank. “Tranquillity, and time to implement the necessary structural changes to reflect the new realities.”

With the damage from violent anti-austerity protests last week still evident in Athens’ Syntagma Square, just a few hundred metres from EFG’s headquarters, it is clear that both tranquillity and time will be in short supply.

Greece’s struggling banks, lauded for their prudence during the financial crisis, are now trapped in a political crisis that has stripped them of control over their own destiny.

Parliament’s passage of a tough, unpopular programme of public sector spending cuts has ensured that Greece receives enough international aid to stave off an immediate default.

But it has not yet secured much-needed liquidity relief for a banking system that remains dependent on the European Central Bank to meet its funding needs.

Nor has it determined whether Greek banks will have to recognise losses on their large portfolios of Greek government bonds, forcing them to recapitalise.

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