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LONDON, Feb 7 (Reuters) - Efforts by Greece’s top four lenders to cut costs and sell non-core activities may generate capital equivalent to a 5 billion euro boost in the bank rescue fund’s (HFSF) current buffer, the country’s central bank chief said on Friday.
The country’s four major banks are undergoing a second round of stress tests to check if last summer’s 28 billion-euro ($38 billion) recapitalisation has left them capable of absorbing future shocks as bad loans keep rising.
National Bank, Piraeus Bank, Eurobank and Alpha Bank control about 90 percent of Greece’s banking market after a wave of consolidation and the winding down of smaller peers deemed non-viable.
The more capital they generate through restructuring to boost their equity, the lower their potential need to tap the Hellenic Financial Stability rescue vehicle for extra funds.
The Hellenic Financial Stability Fund (HFSF), financed by Greece’s EU/IMF bailout, covered 25 billion euros out of last year’s recapitalisation in return for shares in the four banks, becoming their majority owner. It has a cushion of 8 to 9 billion euros.
“The efficient use of the backstop during recapitalisation and resolution has left a buffer of around 8-9 billion (euros at the HFSF), should additional capital needs arise,” Bank of Greece Governor George Provopoulos said in a speech to a monetary and financial institutions forum in London.
“The sale of non-core assets and the exploitation of synergies arising from mergers could add some 5 billion euros to the (HFSF) buffer,” he said.
Provopoulos, who is also a European Central Bank Governing Council member, said structural and fiscal reforms in Greece and the euro area were working, but the situation in the debt-laden country remained fragile, partly due to political uncertainty.
“Supported by the ECB’s policies and the strengthening of the EU’s architecture, that recipe is working,” he said, reiterating his view that Athens will pull out of a six-year deep recession this year.
Provopoulos also said he expected Greece’s euro zone partners to reward the country’s success in delivering a primary budget surplus last year with debt relief measures.
“I expect that the Eurogroup will agree to measures to help improve Greece’s debt dynamics,” he said.
$1 = 0.7353 euros Reporting by Marc Jones; writing by Harry Papachristou and George Georgiopoulos, editing by David Evans