Interview with SKAI TV
Interview of Danièle Nouy, Chair of the Supervisory Board of the ECB,
conducted by Sia Kossioni on 15 March 2017
Question: Ms Nouy, how did you find the situation with the Greek banks? You met with the bankers yesterday. What did they tell you?
Nouy: Yes, this is my third annual visit to Greece. I make such annual visits to all Single Supervisory Mechanism (SSM) countries, each of the 19 SSM countries. The important parts of these visits are the meetings with the national supervisors that are working for the SSM and with the bankers. So we had really constructive meetings and that's been quite successful in making this visit.
Question: Did the bankers have any worries that they shared with you?
Nouy: Well, yes, they have challenges so they want to get responses to questions related to these challenges. During the previous years, the challenge for the Greek banks was the solvency situation, the recapitalisation. Then it was the reshuffling of the boards of the banks and sometimes the senior management of the banks as well. And now they are facing this important issue of non-performing exposures (NPEs). There is a high percentage of non-performing exposures in the Greek banks, so it's quite a challenge and they are asking questions on the best way to implement the plans that have been agreed with the SSM.
Question: In which way do you think the Greek banks are affected by the delay of the completion of the review? This is something that the bankers are also worried about and they share this concern very frequently.
Nouy: Well, completing the review means more confidence - and banking business is about confidence. So it will be a strong signal to the markets, to investors, to the depositors as well that can go back to the banks if the review is completed.
Question: Now, in January there were more than €1.5 billion that leaked from the Greek banks. Is this a reason for concern?
Nouy: Well, indeed 2016 had brought good news on many fronts. The first two months of 2017 have been a little bit disappointing, as if there was a pause in the progress. At the same time, we have seen that hoarded cash also has been reducing. So maybe it's a temporary phenomenon - individuals and corporates paying taxes or bills - and the situation will become more normal in the coming months. I think it's a bit early to draw conclusions on that.
Question: Furthermore, Greek banks raised their borrowing from the emergency liquidity assistance (ELA) in February. Should we be worried about this?
Nouy: Well, it goes with the deposits that are leaving the banks or not going back into the banks as was the case at the end of 2014, let's say. So yes, the funding of the banks using less ELA and more deposits and investors on the market is something that we monitor very closely. And again that can be temporary, we hope it is temporary.
Question: Are you satisfied by the decisions regarding the NPEs made by the Greek Government? And what are the risks now?
Nouy: Well, a lot of progress has been made. Laws have been made, but there are still a few more to make. We need additional tools. I know that there are laws that could be enacted soon regarding electronic auctions for example, legal protection for the banks that are doing what they should do: fixing the NPE issue. So, I hope those laws will be enacted soon in order to move forward with the non-performing exposures. The idea is to start a virtuous cycle, really. The banks that are overloaded with non-performing exposures cannot fund the economy. They put their strengths and their resources into addressing these issues. So if the issue can be properly addressed, they will be more able to fund the economy, which means that there will be more growth and at the same time borrowers will be more able to reimburse the banks. So it is just a start.
Question: But there is progress?
Nouy: There has been progress. Again, the first two months of the year have been a little bit disappointing. But now we have to implement the good plans that we have received from the Greek banks and that we have challenged as supervisors, because this is what supervisors are doing: challenging the plans that are submitted. Now they need to be implemented; part of this implementation depends on the new laws that have to be passed.
Question: How would the Greek banks benefit from the participation of Greece in the quantitative easing (QE) programme? Do you expect it to happen soon?
Nouy: Well, it's not up to me to say. I'm not in charge of this aspect of the ECB work and we work under the separation principle. But it means obviously a strong signal. It would mean a strong signal for investors and it would mean more confidence. And the banking business is about confidence. Bankers will be more able to address their issues if they are operating in an environment with more confidence. Depositors, for example, would come back to the banks, which is important.
Question: Some say that Greek banks will not avoid a new recapitalisation. Do you share this opinion?
Nouy: No, I don't share this opinion. The Greek banks are well capitalised now. I would put as the first priority to address non-performing exposures and to make the new boards, the governance reforms that have been undertaken during the last 12 months, work properly. Those are the priorities.
Question: How do you evaluate your cooperation with the Bank of Greece?
Nouy: It is excellent and it has been excellent from day 1. We have a very, very good cooperation with the Greek supervisors.
Question: And one more question that I forgot to ask earlier has to do with the capital controls. How long will the Greek people be living with capital controls, do you think?
Nouy: Well, it's like QE. It's not exactly for me to say that. Well, hopefully not too long, because again it's all about confidence – when there is enough confidence in the system to be able to live without them.
Question: And my final question has to do with the situation in the European banks actually, in general. It has been more than two years since you assumed the supervision of the euro area banks. What have been the major achievements? And what are the main challenges?
Nouy: The big achievement has been to be able to start supervision less than 12 months after starting the building of the new institution, which was done between January 2014 and November 2014. Then we managed to adopt a single manual, single policy stances on a lot of important issues. We have defined the tools: harmonised tools like the Supervisory Review and Evaluation Process, the “Pillar 2” for the banks. We have also been able to address an issue which is important for a number of banks in a number of countries, that of the non-performing exposures. So in other countries as well, not only in Greece, non-performing exposures are something important - that's a big priority. In fact, the important priorities for 2017 are business model sustainability and profitability drivers. There is a profitability issue for euro area banks in general – not for all of them, but in general. Also, improvement of risk management, and credit risk - and that's about non-performing exposures and the concentration of risk in certain sectors like real estate, for example, in certain countries. So those are the two major points.
Journalist: Thank you very much, Ms Nouy.
Nouy: Thank you.