Eyes on banks as Greece reopens bourse today

People queue as they wait outside a National Bank branch to open in Athens on July 20. According to news reports yesterday, the top four Greek lenders — National Bank, Piraeus Bank, Alpha Bank and Eurobank — will undergo an asset quality review later this month.AFP/AthensAttention will be focused on Greece’s embattled banks today when the Athens stock exchange reopens after a six-week shutdown over the country’s debt crisis. The banks are in a vulnerable position because of outflows of billions of euros (dollars) from deposits over the past six months. Some €40bn ($44bn) has been withdrawn from Greek banks since December, according to the country’s banks association. And according to news reports yesterday, the top four lenders — National Bank, Piraeus Bank, Alpha Bank and Eurobank — will undergo an asset quality review later this month. Stress tests will follow in the autumn to determine the recapitalisation requirements of each bank with European rescue funds. Greek officials want to complete the operation before new European regulations come into effect from January 1. As of 2016, bank shareholders and depositors will foot the lion’s share of recapitalisation costs — a process known as “bail-in” — instead of European taxpayers. Greek banks were also recapitalised in 2013 with funds from the country’s last EU-IMF rescue package. The reopening of the market comes after senior EU and IMF auditors held their first meetings with Greek ministers to finalise the new three-year bailout which could be worth up to €86bn ($94bn). The last session was on June 26, a few hours before Prime Minister Alexis Tsipras announced a referendum on the bailout conditions demanded by Greece’s international creditors. The main index had closed at 797.52 points, up 2.03% jump. Over that weekend, Greeks rushed to bank cash machines, prompting the government to impose capital controls from June 29, followed by the closure of the banks and the stock exchange. The aim was to protect the banking sector following the huge withdrawals by people nervous about Greece’s economic and financial future. For the duration of the crisis, Greece’s banks have been relying on one lifeline: an ECB credit facility called an Emergency Liquidity Assistance (ELA).  The Frankfurt-based lender last week left the ELA unchanged at €90.4bn The banks reopened after three weeks on July 20, but withdrawals and money transfers abroad remain under tight controls. Greeks can withdraw only up to €420 ($460) a week. The capital controls were slightly eased for businesses last week but economic activity, especially imports, continues to encounter numerous obstacles. Founded in 1876, the Athens stock exchange has closed down more than a dozen times in its history, the weekly To Vima reported yesterday, most recently in 2008 owing to a strike by Bank of Greece staff. Other instances include the Balkan Wars of the 1990s, the World Wars I and II, the Turkish invasion of Cyprus in 1974, 1987’s “Black Monday” in the US and the outbreak of a stocks manipulation scandal in 1996. The Greek economy is already forecast to contract by 3% this year by the Standard and Poor’s rating agency, but extended capital controls and a big bail-in could constrict activity even further.