TITLE:
Consequences of the Financial Crisis and Capital Adequacy in Greek Banks
AUTHORS:
Simeon Karafolas, Vaia Stergiou
KEYWORDS:
Bank, Capital Adequacy, Cooperative Bank, Financial Crisis, Greece
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.12 No.4,
October
27,
2023
ABSTRACT: Distinct
from other countries, in Greece, the global financial crisis continued during
the decade 2010 and became an economic crisis resulting in a recession. It
resulted from implementing measures aimed at reducing Greece’s high public
debt, as the country had reached an agreement with the European Union and the International Monetary Fund on public
borrowing. Unlike other countries, public debt is at the core of the
Greek crisis. The economic crisis has
primarily affected the Greek banking system, capital banks, and
specialized credit institutions such as cooperative banks. The economic
depression during the decade was reflected in the banks’ activities and
results, while in the middle of the decade, it led to a considerable increase
in non-performing loans. In addition to these consequences, most Greek banks
suffered from the halving of the value of Greek bonds in 2011, as they were
involved in financing the Greek government. The generalization of these
phenomena distinguishes the Greek case from other banking systems while
limiting the argument of poor management for the outcomes of the banking crisis
in Greece. Banks’ difficulty meeting the capital requirements set out in the
Basel Regulations III was a vital component of the banking crisis. As a result
of these difficulties, some banks were unable to meet the requirements and were
forced to close or be sold by their parent banks. In the case of a particular
category of banks, the so-called economically significant banks, there was
substantial public support for capitalization, contrary to the other banks,
which had to raise the necessary capital themselves. This article examines the impact of capital requirements on bank development,
both for capital and cooperative
banks, and also attempts some comparative accounts between them.