“2023 EU-wide Stress Test results: “Deep Dive” Analysis on Greek Systemic Banks”

Athens, November 27, 2023. The Financial Stability Fund (HFSF) announces the publication of the third "HFSF Bulletin" regarding the Results of the 2023 EU Wide Stress Test (ST) Exercise on Greek Systemic Banks’ resilience. This in-depth analysis aims to highlight the key points of the resilience of the Greek systemic banks under adverse macroeconomic assumptions, carried out by the European Banking Authority (EBA) in collaboration with the European Central Bank (ECB) and the national supervisory authorities. The simulation exercise was based on a static approach on banks' balance sheets, taking into account their financial and capital position as of 31.12.2022, under severe conditions over a three-year time horizon (2023-25) based on a baseline and an adverse scenario.

According to HFSF’s analysis, Greek systemic banks managed to emerge stronger from the toughest resilience exercise so far by recording spectacularly better performances compared to the respective ST exercises in 2021 and 2018, given the effective reduction of non-performing exposures (NPEs) but also the increase in their profitability in recent years. The Greek banking system, represented by the four systemic banks, was ranked 4th among 16 countries of the European Union, compared to 11th and 15th positions in 2021 and 2018 respectively. Also, the Greek banking system was ranked 1st among the banking systems of the countries of the South of the European Union.

Consequently, Greek banks’ performance fuels reasonable expectations for a reduction of their regulatory capital requirements (P2G and P2R) that will provide space for shareholder remuneration in the form of cash dividends and/or share buybacks in the near future.

Furthermore, the Greek systemic banks, although they have significantly improved their capital positions and asset quality, should - among others:

·???????? focus on the expansion of the loan portfolio taking into account the credit risk originating both from individual borrowers and from the concentration risk in specific sectors of the economy,

·???????? continue strengthening the management of risks deriving from the granting of loans but also from their activities in general,

·???????? enhance their risk free income from fees and commissions through further business development and the utilization of innovative tools (e.g., synthetic securitization),

·???????? incorporate international Environmental, Social and Governance (ESG) best practices, focusing on managing the risks of climate change, into their business model and operations.

As the next EU Wide Stress Test exercise is planned for 2025, Greek banks having raised the bar of expectations should prepare intensively for the EBA's Climate Risk exercise, as well as for the ECB's business resilience exercise on cyberspace scheduled for 2024.

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HFSF Bulletin No3 in detail is available here.