Greek Banks Leverage ECB Policy and Credit Upgrades to Lower Costs

Greek banks are set to take advantage of lower borrowing costs in the market, driven by the easing of monetary policy on behalf of the European Central Bank (ECB) and the banks’ recent credit upgrades by international credit agencies.

Through the issuance of new bonds, recently, the banks have significantly improved their capital positions while at the same time reducing the average cost of servicing their obligations.

This strategic approach is expected to continue in the following months as conditions are forecasted to be favorable for its successful implementation.

It should be noted that during the past six years, Greece’s systemic groups have faced the difficult task of strengthening relevant ratios in line with the targets set by the Single Resolution Board regarding the Minimum Requirement for Own Funds and Eligible Liabilities (MREL).

The issuance of bonds began in 1918 amid a much more hostile environment for the domestic banking sector, as access to the market was limited because of a lack of confidence in the aftermath of Greece’s economic crisis.

However, the exit from the bailout programs, followed by the lifting of capital controls, improved macroeconomic prospects, and successful bank transformations, have mitigated risks and rapidly accelerated their progress. As a result, Greek banks have managed to raise approximately 15 billion euros from the markets to date.

Following the country’s return to investment-grade status, which was accompanied by corresponding upgrades for the now-stabilized banks, the cost of borrowing has dropped significantly.

Additionally, the reduction in interest rates within the Eurozone, which began last June, is expected to continue at a satisfactory pace until the end of 2025.

Consequently, Greek credit institutions currently have the opportunity to significantly reduce the cost of repaying bonds issued in previous years and further strengthen their capital positions.