Reasons why this time Greek banks seem better prepared for the scenario of an international storm developing ink” Chief Economist of the National Bank Nikos Magginasstressing that “there is currently no sign of systemic pressure disrupting their business plans.”

Analysis of the events that led to the accelerated acquisition Credit Suisse from UBS in Switzerland, Mr. Magginas refers to the antibodies that banks acquired during the Greek crisis and explains how their bond portfolio provides protection against high interest rates. He recommends being cautious and reacting quickly anyway, warning that markets tend to look for the next “weak link”. For her next steps ECBpredicts further rate hikes, “perhaps at a more lenient pace.”

– The events at Credit Suisse are the culmination of a series of misguided decisions over a number of years that:

– Undoubtedly yes. Both the events of the last few days and the experience of the very severe global financial crisis that manifested itself in 2007/08, as well as the multi-year Greek financial crisis, mainly demonstrate that chronic weaknesses, imbalances, as well as the peculiarities of the business/financial models of banks firms and even states tend to be interpreted much more unfavorably when multiple destabilizing factors are combined. Markets tend to completely overestimate risk in the light of new information, random events, even slow reflexes or mistakes they detect, looking for the next real or perceived “weak link” with the criteria they deem relevant at the moment. For this reason, it is imperative that such situations of escalating volatility are resolved promptly so as not to create room for misinterpretation or destabilizing speculation. By this criterion, the Swiss authorities acted particularly quickly, which inevitably led to controversy over some of their actions. We see the same thing happening in the US, where efforts are being made to ease any concerns about part of the banking system after major shocks in three banks (which, however, had a different starting point and reasons compared to the CS case). ).

– The European Central Bank has made clear its intention to continue to prioritize its core statutory goal of price stability, projecting a further increase in interest rates – until there is a material change in its underlying macroeconomic scenario – as underlying inflationary pressures appear to be more resilient than expected. The resilience of the European economy, which has weathered the winter without major energy shocks, has given the ECB more confidence that it is sticking to its plan. However, in her latest statement, she did not take the next step, and Ms. Lagarde emphasized more strongly that they will continue to weigh the flow of new data and economic data on an ongoing basis. At the same time, he emphasized his readiness to activate or strengthen existing mechanisms (in accordance with PEPP standards) in the event of excessive volatility or pressure in financial markets and/or interruptions in the flow of liquidity. The experience of past years has shown that interest rates are not the only tool in the arsenal of major central banks to deal with volatility spikes. While it may be premature, I would venture to say that the ECB – given its extensive experience and familiarity with crisis management and the availability of appropriate tools – is more likely to continue raising or raising rates further, perhaps at a more restrained pace. provided that there are no new pockets of uncertainty at the international level, and the European economy remains on an upward trajectory. Policy actions from the other side of the Atlantic will also be factored into the next steps of the ECB, which, however, remains at an earlier stage in the money cycle.

Borrowing does not “slow down”.

– At the moment, neither the Greek nor the European banking system shows signs of systemic pressure to disrupt the business plans of banks, except for the inevitable consequences of an increase in ECB interest rates. Starting from a low starting point, they are accelerating private sector lending (12-year high with net private sector lending, €7bn in 2022) and trying to contain ECB interest rate pass-through as much as possible. to borrowing costs. The resilience of the economic recovery, the strengthening of the positive impact of the Recovery Fund and increased activity in private investment, combined with the expected upgrade of the country’s credit rating, I believe will add further momentum to this trajectory in the coming years.

The Greek banking system must always be on the alert

– There is no doubt that the rules have changed radically in Europe and significantly in the rest of the developed and developing world. The administrative, supervisory, regulatory and regulatory framework has been improved, anti-crisis response tools have been multiplied, the quality of corporate governance and control over the banking system has been improved. The emergence of risks of a different nature is inevitable both in the global economy and in the financial system, but at the same time, the mechanisms for their timely accounting, quantification and evaluation have been radically modernized. This improvement is even more evident in the supervisory perimeter of the SSM and even more so in Greece. The intensity and rigor of prudential supervision, the density of accountability and the quality of the structural changes implemented in the Greek banking system were even more ambitious than in other countries in the context of attempts to overcome the effects of a multi-year crisis.

– The Greek banking system is now systematically performing very well in terms of capital adequacy and liquidity, has returned to a position of organic profitability and continues to conduct proactive “readiness” checks under adverse assumptions that often mimic the most difficult stages of the Greek crisis. The above, along with the steady improvement in macroeconomic conditions, I consider the best confirmation of the reliability and stability of the Greek banking system.
Vigilance is of course required at all times, as pockets of risk often emerge outside the main perimeter of supervision or in less explored areas at the international level, potentially due to the shadow financial activities of non-banks, or due to idiosyncrasies or subtle imbalances in systems with global influence. lack of agreed supervisory rules (such as aspects of China’s financial system). Extraordinary events such as the pandemic and the unfolding very serious crisis in Ukraine have shown that we must be prepared even for the unexpected.