Greece: Bank Stocks Sink, Will IMF & ECB Stress Test Bad Loans?

Shares of Greek banks have been slipping in recent weeks as the threat of multiple stress tests shine a light on the quality — and scrutiny — of financial assets in the struggling nation.

The financial crisis in Greece and unemployment have resulted in non-performing loans, though Greek banks entered the 2008 global financial crisis with 5.5% of loan books in the NPL category, according to Reuters. In August, Reuters reported that bad loans accounted for half of Greek bank loan portfolios last year, at 106.9 billion euros, and regulators want the ratio cut to 34%.

This week, Greek newspaper Kathimerini reported that the International Monetary Fund could conduct a Greek bank asset quality review as part of its third bailout review. Then a European Central Bank (ECB) executive board member said there was no need to conduct such a review because “a broader European Union-wide stress test is already being planned for 2018,” Reuters reports. ECB executive board member Benoit Coeure added that “only the ECB, the supervisor of four biggest Greek banks, could require such a review,” Reuters added.

International Monetary Find spokesman Gerry Rice said the following Thursday, according to Kathimerini:

” … The issue of the asset quality review of Greek banks “will form part of the review.” He also said the IMF may demand new measures for next year, stressing that the programs evolve and conditions change …

The story says “this will likely cause friction with the European Central Bank, which has scheduled its own stress tests for the banks in 2018. Sources in Frankfurt have noted that only if the Greek government asks for an asset quality review will the ECB authorize it. However, Athens, as a senior Finance Ministry official has said, has no such intention …”

The Global X MSCI Greece exchange-traded fund (GREK) is down 2.2% today. The yield on the Greek 10-year was off by 1 basis point to 5.305%. Shares of  $3.3 billion Alpha Bank (Article Source…

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