Greek banks need 14.4 billion euros to get on track

Weakened after years of recession, Greece’s banks took a further battering earlier this year as the left-wing government of Alexis Tsipras pushed the country to the brink of a euro exit in a standoff with Berlin and Brussels over the terms of Greece’s worldwide bailout. There are now an additional €7 billions’ worth of loans at risk of non-payment – a total of €107 billion.

The four banks will have to submit capital plans to ECB Banking Supervision explaining how they intend to cover their shortfalls by November 6.

That is roughly half of all the credit given by the country’s four big banks, according to the ECB. Nearly 57 percent of the loans made by Piraeus Bank, the bank which fared worst, are at risk.

Hedge funds and other investors may be encouraged to buy shares, given that the declared capital hole is less than the €25 billion destined to help banks in Greece’s bailout.

Although the banks are now been kept afloat by access to money through the euro zone monetary system, there is a rush to get recapitalisation completed.

Though large, the number announced by the European Central Bank is lower than a few experts had feared.

Separately, the Bank of Greece published the results of a similar assessment of Attica Bank, a smaller lender.

Greece is racing to bail out the banks before year end, when new European bank bailout rules take effect that would require seizing deposits over the 100,000-euro ($110,000) limit on deposit insurance.

Greece’s Finance Minister Tsakalotos said on Saturday he was optimistic that Greece’s banks would successfully recapitalise by the end of the year.

Two tests had shown combined shortfalls of 4.4 billion euros under a baseline scenario and up to 14.4 billion euros ($15.8 billion) under an adverse scenario, it said.

In the meantime, Greek lawmakers were expected to vote by next Friday on a second key draft bill containing the second set of prior actions that need to be passed so that Athens can receive the next bailout loan installment in coming days.

“There’s a meaningful stabilization of the Greek banks”, Nathan Sheets, undersecretary for worldwide affairs, said in an interview ahead of Saturday’s stress test and asset quality review results. “This is a good sign for private investors and Greek citizens because it marks a long-term commitment to the banking sector”, he said.