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Report Explores Scenarios Greek Banks Could Face, Depending On Potential Sovereign Developments
MADRID June 15, 2011--In a report published today, Standard & Poor's Ratings Services comments on its view of different scenarios for the banking system stemming from the potential impact on Greek banks should Greece restructure its debt and from Greek depositors' perceptions of a possible government debt restructuring (see "Standard & Poor's Comments On Some Scenarios That Greek Banks Could Face, Depending On Potential Sovereign Developments").
We believe any such restructuring could affect Greek banks' capital bases. The magnitude of the impact would largely depend on the amount of debt affected and the terms and conditions of any restructuring. For example, the effect would vary according to whether the potential restructure involves principal "haircuts", a lengthening of debt maturities by extending the maturities of existing debt or by exchanging existing bonds for longer-term new debt, or altering the level of the coupon on any new bonds offered in exchange, relative to the original debt. The impact would also depend on any forbearance in its recognition.
As a result, scenarios for Greek banks in the event of a potential Greek government debt restructuring range from being able to operate with capital levels above minimum regulatory limits, for example, if the government debt restructuring affects only part of the government debt, to potentially facing insolvency in the more negative scenarios affecting the whole of rated banks' large portfolios of Greek government debt.
However, we believe Greek banks face a relatively short-term risk of a liquidity crisis, mainly due to what we see as an increasing risk of accelerating pressures on retail domestic deposits against the backdrop of increasing public debate over a potential government debt restructuring.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4009.
Jeff Sexton, New York (1) 212-438-3448, firstname.lastname@example.org
Angela Cruz, Madrid (34) 91-389-6945
Luigi Motti, Madrid (34) 91-788-7234
Financial Institutions Ratings Europe