A strict but expected character characterizes banks an unfavorable macroeconomic scenario, based on which the funds of four systemically important banks will be “stressed” during the three years 2023-2025, in the context of stress simulation modeling (stress test) is implemented by the ECB and coordinated by the European Banking Authority (EBA). The seriousness lies in the significant recession that the ECB predicts for the Greek economy in 2023 and 2024, at -1.9% and -4.5% respectively, and in the low growth of 0.9% in 2025, with a parallel decline in residential and commercial real estate. real estate prices and keeping inflation high. Banks estimate that this is a remote scenario that is not considered realistic and cannot be tested except under extreme and unpredictable conditions. As announced by the ECB, the results of the stress test will be used “to assess the impact of adverse shocks on the resilience of banks in adverse macroeconomic conditions” and will be made public in July. The results will calculate an additional capital cushion that all banks must have under Pillar 2 (P2G), but are not estimated to result in additional capital requirements for Greek banks. Today, the additional capital cushion is 1.5-1.75% depending on the bank and given that banks have significantly improved their image due to high levels of non-performing loans in the past, and also taking into account rising interest rates. which increases their profitability, the question is to keep, if not reduce, the capital stock to the same levels in order to document the goal of distributing dividends to shareholders.

Scenario for Greece.

As can be seen from the macroeconomic scenarios published by the ECB, the unfavorable scenario adopted for Greece is much softer than the corresponding scenarios projected for other European countries, according to which all economies will fall into deep recession, with the largest recession detected. in Germany (-5.2% in 2023 and -6.4% in total). For the Eurozone as a whole, the likely downside scenario is -3.4% in 2023 and -4.1% in 2024, followed by a 1.6% rise in 2025. Conversely, the base case predicts for Greece has a solid growth of 1.5% in 2023 against a weak growth of 0.5% in the euro area.

Test Assumptions

The results will determine the additional capital cushion that all banks should have.

Specifically, the assumptions for Greece are as follows:

Real GDP: The base case projects growth of 1.5% in 2023, 3% in 2024 and 2.8% of GDP in 2025. In the unfavorable scenario, the calculation includes a decline of 1.9% this year, 4, 5% in 2024 and a recovery of 0.9%. % in 2025 (on a cumulative total of -5.5% over 3 years).

Unemployment: The rate is set at 11.5% this year, 10.4% in 2024 and 9.4% in 2025 in the base case. On the other hand, it will rise from 12.7% this year to 16.1% in 2024 and 17.3% in 2025. Inflation: In the base case, it slows to 5.8% this year, to 3.6% in 2024 and 2.5% in 2025. Under the worst-case scenario, inflation remains high at 8.3% this year and eases to 4.6% in 2024 and 3.2% in 2025. House prices: The base case assumes prices rise over three years (4 .7% this year, 3.4% in 2024 and 3% next). year). On the other hand, prices will fall by 2.1% this year, by 7% in 2024 and rise to 2.9% in 2025.

Commercial property prices: up 3.2% this year, 3.1% in 2024 and 3% in 2025, according to the baseline forecast. On the other hand, the decline in 2023 reaches -9.2%, they decline again by -6.1% in 2024 and continue to fall by -2.2% in 2025.

Long-term rates: The base estimate assumes an average rate of 4.18% this year, 4.14% in 2024 and 4.13% in 2025. On the other hand, leverage is increasing to 8.28% this year, 6.89% in 2024 and 6.43%. in 2025.