eleni d dendrinou - louri : assessing the performance and regulation of the greek banking system speech by ms eleni d dendrinou - louri, deputy governor of the bank of greece, at the conference : “ the future of banking in greece : redefining the business of financial services to drive growth and expansion in 2009 and beyond ”, athens, 21 january 2010. * * * ladies and gentlemen, i would like to thank “ the banker ” and “ financial times global events ” for inviting me to participate in this conference and giving me the opportunity to address such a distinguished audience. in this intervention, i will present an overview of the greek banking sector and outline the major challenges and opportunities that greek banks face. i will finish by providing a perspective about the new regulatory framework changes proposed by the basel committee. during the current decade, the greek banking system has enjoyed a favourable macroeconomic environment, in both greece and in south eastern europe ( see ). this situation has contributed to healthy profitability, underpinned by rapid loan - portfolio growth, relatively wide net interest margins, high - yield lending to see borrowers and broadly resilient fee - income generation. these factors, in conjunction with the negligible exposure of greek banks to us subprime assets and other complex structured products, considerably mitigated the financial fallout from the first wave of the recent global financial crisis, the worst since the great depression in the 1930s. however, the greek economy and other markets where greek banks operate, notably see, have not been spared by the second round effects of the crisis. the liquidity squeeze and the asset - quality deterioration tested the greek banking system, which fared rather well in the course of the previous year ( 9months to be exact ). more precisely : greek banks ’ capital adequacy remained at satisfactory levels and was gradually strengthened ; profitability declined but remained at overall satisfactory levels ; credit risk increased and so did loan loss charges, with signs of moderation in the 3rd quarter of the year ; enhanced by ecb funding, the greek government ’ s liquidity support package, and the increase in deposit base, the liquidity position of greek banks remained satisfactory. in more detail : capital in the first 9 months of 2009, the capital adequacy of greek commercial banks and their groups was substantially enhanced. this development was attributed mainly to a considerable increase in prudential own funds, while a marginal rise was recorded in risk

robust banking sector. still, liquidity needs in resolution may easily surpass what is currently provided for. drawing from the experience of the bank of england, the establishment of a special credit line by the ecb could be considered, subject to appropriate safeguards. similarly, and as already mentioned, the european commission communication of december 2020 on tackling npls through a network of national amc ’ s and the further development of the secondary market for loan securitization, as well as the possibility to grant precautionary recapitalization aid to viable banks so as to facilitate the transfer of npls under certain conditions, is also an important step in the right direction. 5. outlook for the european banking system for 2021 - 2022 the outlook for the european banking system is closely related to the developments in the economy and the fight against the pandemic. therefore, i would like first to comment on this before i move on to the outlook of the banking system per se : on the health factor, it seems that the news will be positive especially after the vaccination of a large part of the population within the 1st quarter of the year that will ensure the necessary immunization from the virus. according to the latest baseline scenario of the eurosystem staff macroeconomic projections, the economic growth will return to positive territory this year. real gdp is projected to increase by 3. 9 % in 2021 and 4. 2 % in 2022, due to the recovery of both domestic and external demand. fiscal policy is expected to remain expansionary until a very large proportion of the population is vaccinated and, particularly, the european economy returns to a stable growth path. monetary policy will remain accommodative until inflation converges to the target of 2 percent in a sustainable and robust way. with available data, inflation in 2023 is expected to remain well below 2 percent. the impact from the creation of the eu recovery tool ( ngeu ) will be visible in 2021. ngeu will finance growth initiatives, in the period 2021 - 2026, worth €750 billion at constant 2018 prices. the recovery tool will be funded through the issuance of mutual debt at the eu level, which will be repaid between 2028 and 2058. for some small european economies such as greece, the funds available through the ngeu will provide significant opportunities for the modernization, the green transition and the digital transformation of the economy. 4 / 5 bis central bankers'speeches moving now