How the Bank helped to stabilise the Greek banking system

The EBRD has stepped up in a major way in many crisis situations. Perhaps one of the most dramatic was in 2015, in response to the Greek sovereign debt and banking crisis. In 2014, the Greek government had asked the Bank if it could become a country of operation to assist with its economic recovery. Policy reforms were starting to deliver signs of growth in early 2015 as the Bank began its mandate. However, by the summer, the crisis had exploded into a full-blown emergency on the back of a referendum on leaving the eurozone, with limits on bank withdrawals, capital controls and the closure of the country’s capital markets. Banks faced both solvency and liquidity crises.

The EBRD set out to assist a broad-based effort to stabilise the financial sector and restore confidence through capital injections and improvements in governance. The task was huge.

The capital gap in a base-case scenario was estimated at €4.1 billion – an amount that was to be raised from the private sector to avoid further burdening the deeply indebted Greek government. By November 2015, the Bank brought a package of €250 million to the Board for investment in the country’s four systemic banks – Alpha Bank, Eurobank, National Bank of Greece and Piraeus Bank – which made up 90 per cent of the sector. With a massive collective effort, the team brought the proposal from concept review to the Board in only just weeks, including a Board Information Session. The funds were allocated according to need, with less invested in the institutions that had better market access. The package was accompanied by improvements in governance, in partnership with the Hellenic Stability Fund. Management boards were reviewed and seasoned directors were appointed to supervisory boards, including EBRD nominee directors. Each element of the programme was critical to its success.

And it was successful. Following the capital injection, the Bank worked to restore access to trade finance, the lifeblood of trade and investment, providing some €500 million through the Trade Facilitation Programme (TFP), with significant volumes of TFP lines continuing through 2025.

The Bank supported a variety of instruments to facilitate the sale and workout of non-performing loans, enabling the banks to reduce them from around 50 per cent to normal levels by the end
of 2025. In addition, the Bank introduced asset securitisation and other capital optimisation instruments.

The programme proved effective, facilitating the banks’ return to capital markets, while improved governance ensured prudent management through Covid-19 and other exogenous shocks. By the time the EBRD had wound down its operations in Greece at the end of 2025, the Bank had exited its equity positions in all four institutions and the banks themselves were looking to the future.

Charlotte Ruhe
Former EBRD Managing Director for Central and South-Eastern Europe