Greek Banks Can Cover Bad Loans

Greek central bank chief George Provopoulos

ATHENS – With default rates running as high as 42 percent, recapitalized Greek banks have enough bailout funds to cover losses from bad loans, the country’s central bank chief George Provopoulos said.

His remarks came as the institutions were awaiting an imminent report from asset manager BlackRock on their financial health. The banks had been struggling because of non-performing loans during the country’s economic crisis and taking a 74 percent loss on their holdings in Grek bonds imposed by a previous government to write down debt.

“I cannot run ahead of the results of BlackRock’s report. But I can safely say that there is enough leeway to cope with any capital need,” he told financial website bankingnews.gr.

BlackRock will deliver its findings on lenders’ loan portfolios to the Bank of Greece on Nov. 30. A week later it will deliver the results for the loan portfolios of subsidiaries abroad.

The International Monetary Fund, which, along with the European Union and European Central Bank makes up the Troika of lenders putting up $325 billion in two bailouts to save the economy, has predicted Greece will emerge from a six-year recession with growth of 0.6% in 2014.

BlackRock has figured worst-case scenario rates of recovery – in contrast to IMF figures – in order to determine local banks’ minimum capital requirements.

Greek banks have received €40 billion ($54.1 billion) from the Troika so far but critics said they are nonetheless not lending enough and are seeking to foreclose on the mortgages of Greeks who can’t pay because of big pay cuts, tax hikes and slashed pensions.

Provopoulos also said that in October there was another €8-9 billion of bailout funds available for the banks and that Greece would post its first current account surplus for decades, later this year, not including interest on debt, the cost of state enterprises and city and town governments, social security and some military expenditures.