Actually, to put a number on it, the Greek banking system and the two biggest Cypriot lenders possess €13.8bn more exposure to the Greek sovereign than we thought they did, according to stress test disclosures.
We’ve noted the contrast between those disclosures and previous estimates below. The exercise has a Mr Creosote feel about it. We already knew that Greek banks were dangerously stuffed with debt from their own sovereign and sovereign default was a major threat at €42.1bn of estimated exposure, never mind at €54.4bn.
But it’s nice to have definite numbers. Specifically, ’estimates’ mostly refer to information gleaned from the banks’ financial statements, and from analyst reconstructions like this one. The exposure’s of this kind:
We’ve also included the EBA’s breakdown of maturities in the banks’ exposure, so you can see how much may be tendered in a rollover-type agreement from each bank. Interesting in itself.
It seems the results can be divided into three categories (tables below based on the two columns above):
1) Estimates missing “loans and advances” exposure:
National Bank of Greece (Est. €13bn -> Test €18.8bn)
Atebank (Est. €4.6bn -> Test €7.85bn)
2) Estimates over-stating actual exposure:
Piraeus Bank (Est. €9.0bn -> Test €8.22bn)
EFG Eurobank (Est. €9.0bn -> Test €8.79bn)
3) Estimates contrast strongly with “extra” exposure:
Alpha Bank (Est. €3.7bn -> Test €5.47bn)
Hellenic Postbank (Est. €3.1bn -> Test €5.3bn)
Bank of Cyprus (Est. €1.8bn -> Test €2.4bn)
Marfin Popular Bank (Est. €2.3bn -> Test €3.4bn)
The exposure added by category 1) has by far the most impact on increasing the overall amount, but obviously category 3) is curious. We’d assume it includes things like the weirdly-priced bonds issued to cover Greek hospital arrears, or for example Hellenic Railways debt, which might not have been fully counted by analysts before. However it is still significant to note, as hospital debts (for instance) are eligible for repo at the ECB.
Which is kind of the point. Whatever extra billions of Greek sovereign exposure there are, that’s probably extra billions that would hang on regardless of whether the ECB makes Greek collateral ineligible after a default rating, as is now being threatened (again).
And naturally you’d need the extra billions to quantify losses in a comprehensive Greek haircut. Morgan Stanley did one based on ‘market-implied’ Greek bond recoveries of 44 per cent, using the EBA data (click to enlarge):
And yes, those are strikingly big negative capital ratios.
Related links:
The IMF, ECB and Greek banks - FT Alphaville
Who will roll-up, roll-up – to the Greek roll-over? – FT Alphaville