Greek Banks; Three Reasons Why They are in Turmoil

-The cost of the recapitalization seems to be pretty high at around 17bn euro. The good stress test scenario limits the amount to 13bn while the bad one takes it up to 17bn,

The 17bn cost is mainly due to latest decision of the SSM to calculate the loan portfolios of the banks according to the worst case scenario which evaluates the bank collaterals at their lowest. This “pessimistic” stress test burdens each bank with an extra 2-2,5bn euros.

-The success of the recapitalization depends heavily on the evaluation of the bailout program be Greece's creditors. In an interview to the FT. the Greek FinMin E.Tsakalotos said that he expects the evaluation around the end of November. If the Greek government moves swiftly and succeeds in passing some of the measures in October, then the recapitalization will get the “green light” by the troika.

-The third reason which affects the evaluation of the Greek banks, and their subsequent recapitalization, is the struggle between Germany and the ECB-SSM. The ECB wants to impose high rates of capital efficiency in the evaluation of the banks while Germany wants to avoid it in order to limit the amount of capital needed for the country's banks.