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ECB Urged by Greek Central Banker to Let Lenders Pay Dividends

Sotiris Nikas
·2-min read

(Bloomberg) -- Bank of Greece Governor Yannis Stournaras urged the European Central Bank to allow dividend payouts by his country’s lenders when supervisors consider the matter in June.

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He said in an interview in Frankfurt that the transformation of the nation’s financial institutions should be fully acknowledged by officials, permitting the first such returns to shareholders since 2008.

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“It’s the time to allow dividends,” Stournaras said. “This decision and the exact parameters will be taken later in the year — in June.”

The last time Greek banks made such payments was the same year as the global financial crisis struck. Subsequently, a decade of debt turmoil that engulfed the country left its lenders with more than €100 billion ($107 billion) of non-performing loans, requiring recapitalizations in order to stay afloat. That’s in the past, Stournaras suggested.

“We all know the constraints, but nobody can deny the huge improvement in the NPL situation, the profitability situation, the capital metric situation, the liquidity situation,” he said. “The time has come for the supervisors to consider allowing the shareholders of the banks to get some dividend.”

Stournaras is also optimistic on the path of the Greek economy.

“I’m sure we’ll continue all the necessary structural reforms to improve potential and actual growth,” he said. “The medium-term average growth rate will be about 2.5% for Greece — compared with about 1.5% for euro zone.”

The Bank of Greece this week lowered its growth forecast for 2024 to 2.3% from a previous estimate of 2.5%. That’s because the overall outlook for the region is also weaker, Stournaras said.

“We’re part of the euro zone, we’re heavily incorporated in the euro zone, we’re not in a vacuum.”

Stournaras added that the country should do two things to avoid future risks:

  • Greece should keep a 2%-of-output cyclically adjusted primary surplus — meaning revenues minus spending excluding interest payments — “for as long as possible”

  • The country must continue “necessary structural reforms.”

--With assistance from Mark Schroers, Rachel Evans, Jana Randow and Andrew Langley.

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