IMF Said to Demand Greater Say on Greek Banks in ECB Wrangle

By Nikos Chrysoloras, Jeff Black and Christos Ziotis  Mar 6, 2014 2:00 AM GMT+0200

The International Monetary Fund wants a greater say in the fate of Greek banks because it’s worried that the European Central Bank is being too lenient on them, three people with knowledge of the matter said.

The IMF views an analysis of the country’s banks run in 2013 by BlackRock Inc. (BLK) as being too optimistic, said the people, who declined to be identified as the talks are private. The fund is concerned that the ECB, which will conduct its own stress test later this year, hasn’t pushed the Greek central bank hard enough to revise BlackRock’s findings, the people said. Those results will be published today.

The IMF is refusing to give ground as it seeks to preserve its role in Greek banking policy just as the ECB prepares to take control of overseeing euro-area lenders. Annointing the central bank in Frankfurt as the sole supervisor was supposed to eradicate the turf wars that sometimes blighted attempts to police banks on a national level in the run up to the region’s debt crisis.

The ECB’s first major task, already started, is to analyze the books of about 130 of the euro area’s largest banks, and assess how much extra money they will need to raise. It is due to report its findings in October. National Bank of Greece SA, Eurobank Ergasias SA (EUROB), Alpha Bank SA and Piraeus Bank SA (TPEIR) are all on that list of significant banks that it will directly supervise from November.

Troika Talks

European officials are trying to return Greece to fiscal and financial health after a crisis that nearly pushed the country out of the euro. Talks with the troika of the ECB, IMF and European Commission on reforms included in existing aid programs started last week, with differences surfacing over the Greek central bank’s estimate of bank capital needs. That number was put at about 6 billion euros ($8.2 billion), according to a fourth person with knowledge of the matter.

While the Washington-based IMF is concerned that the ECB may not press Greece far enough, the ECB is still urging the country to increase the figure for capital requirements before a meeting of euro-area finance ministers on March 10, one of the people said. The fund has taken part in bailouts worth about 240 billion euros for Greece since the start of the euro crisis.

The issue of further payments to Greece may be discussed at that meeting. A spokesman for the ECB and a spokeswoman for the IMF declined to comment.

As the ECB is currently conducting its own Comprehensive Assessment into the region’s biggest lenders, including the four Greek banks, Frankfurt officials may be less concerned with the results of the BlackRock review.

The unpublished stress test run by BlackRock last year as part of Greece’s bailout program differs in methodology from the ECB-led asset review and test to be published in October. The delayed release of the results, due to disagreements with the troika over its parameters, have brought it into conflict with the ECB review, which started in November.

To contact the reporters on this story: Nikos Chrysoloras in Athens at nchrysoloras@bloomberg.net; Jeff Black in Frankfurt at jblack25@bloomberg.net; Christos Ziotis in Athens at cziotis@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net