Giannis Stournaras Governor of the Bank of Greece : Increase in bankruptcies, unemployment, public and private debt, poverty and new red loans…

by on 6 April 2021
Γιάννης Στουρνάρας: Ή "bad bank" ή ενίσχυση εποπτικών κεφαλαίων στις τράπεζες

According to the speech of the Governor Mr. Giannis Stournara at the 88th Annual General Meeting of the shareholders of the BoG The challenges of the Greek economy in the post-Covid era can be summarized as follows:

  • Increase business bankruptcies that will increase credit risk and red loans.
  • Increase in unemployment, mainly of low-skilled workers.
  • Increase in public and private debt. Debt sustainability is a key challenge.
  • Increasing poverty and income inequality
  • Need for a stronger and more efficient health system.
  • Primary deficit of 5.5% of GDP in 2021.
    Risks for banks
    For banks, the challenges are:
  • Low organic profitability in a low interest rate environment
  • New red loans amounting to 8 to 10 billion euros.
  • Reduction of deferred tax assets, which will increase as a percentage of their regulatory capital
  • Competition from digital but non-banking institutions
  • Risks associated with climate change and pandemics
  • Risks and costs related to cybersecurity.
    Establishment of an Asset Management Company (“bad bank”) according to the BoG’s proposal in order to have a holistic and systematic treatment of red loans and deferred taxation.
    In case the bad bank solution is not adopted by the government, then an alternative solution should be sought to
    strengthen the banks’ supervisory funds.