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Greece’s banking sector: Facts & Figures

Greece’s real GDP was 0.00% in 2016 driven by private consumption while all other expenditure-side components exerted a negative contribution. GDP increased by 0.4% year-on-year in Q1 2017 (provisional estimates). A swift completion of the second review and expectations for a strong touristic season support expectations for a further improvement in investor sentiment and domestic economic activity in the second half of 2017. On the fiscal front, the 2016 primary balance registered a surplus of 4.2% of GDP outperforming the 0.5% of GDP programme target and marking the fourth consecutive year of a surplus position in the general government primary fiscal balance. In spite of recent declines, the unemployment rate is still very high (22.5% in March 2017) constituting a source of serious concern especially as it is coupled with an exceptionally high degree of long-term unemployment (71.8% in Q4 2016). However there are indications that the unemployment rate has embarked on a sustained gradual decline trend.

By the fourth quarter of 2016 the Greek banking sector consisted of 37 credit institutions (65 at the end of 2009), 2,332 branches (4,079), 42,628 employees (65,682), and €351 billion in total assets (€491 billion).

There are four main categories of credit institutions operating in Greece. Eight commercial credit institutions are incorporated in Greece and operate under a licence by the Bank of Greece (the central bank), four of which are systemically important according to the respective SSM rules and since November 2014 have been supervised directly by the ECB. Nine cooperative banks are incorporated in Greece and operate under a licence by the Bank of Greece.  There are also 16 branches of credit institutions incorporated in other EU Member States and four branches of credit institutions incorporated outside the EU.

In September 2016, the capital adequacy ratio of the Greek banking system was raised to 18.1% compared to 14.1% in December 2014 and 10.6% in December 2010.

The market share of the five largest credit institutions in total assets have increased significantly since 2009 mainly owing to numerous acquisitions and resolution measures that have taken place during the last few years. The concentration rate was 97.3% in 2016 compared to 95.2% in 2015 and 69.2% in 2009.

Deposits and repos of the private sector (corporations and households) in MFIs in Greece (excluding the Bank of Greece) were at €119 billion in April 2017 compared to €121.4 billion in December 2016). Since end-2009 deposits and repos of the private sector in MFIs in Greece (excluding the Bank of Greece) have decreased by 50%.

Bank credit to domestic corporations and households in Greece (excluding the Bank of Greece) has gradually decreased by about 23% since 2009, (from €249.3 billion in December 2009 to €192.8 billion in April 2017.

The restrictions on cash withdrawals and capital transfers imposed on the Greek banking system in June 2015 had a substantial impact on the increase (albeit gradual) of electronic payment transactions (i.e. those initiated by the use of payment instruments, such as debit, credit and prepaid card payments and/or payment order-based services, such as credit transfers and direct debits). Furthermore, the usage of internet and mobile banking services increased significantly from the second half of 2015.

Apart from the main challenges of the Greek banking sector, which focus on keeping its capital adequacy ratios higher than the regulatory minimum requirements and preserving its liquidity, Greek credit institutions still have to manage the large stock of non-performing exposures, which stood at €105.1 billion or 45.2% of total exposures end-March 2017 registering a decrease of 1.1% compared to end of December 2016 (€106.3 billion or 44.8% of total exposures. The highest percentage of NPEs in each individual loan category was recorded in consumer credit (54.02%) followed by corporate credit (45%) and mortgage credit (42.2%). The coverage ratio of NPEs stood at 49.1% in March 2016. From the beginning of 2016, Greek credit institutions intensified their efforts towards more efficient NPE management undertaking a number of initiatives including the development of a secondary market for both non-performing and performing loans, the establishment of a framework for out-of-court settlement and the adoption of certain targets and key performance indicators that aim at reducing total NPEs by 38% to €66.7 billion between June 2016 and December 2019. With respect to the latter, banks’ NPEs operational targets, set at the end of September 2016 for a three-year time horizon, envisage the reduction to be mainly driven by the curing of loans and write-offs and to a lesser extent by liquidations, collections and sales of loans. In terms of non-performing loans (NPLs) and according to the most recent European Banking Authority data Greece at the end of 2016 featured the largest NPL ratio in Europe at 45.9% of total loans.