U.S. Says Greece Must Lift Bank Governance to Build on Progress

By Rebecca Christie,  Andrew Mayeda

Bloomberg

Greece must improve financial-sector governance now that its biggest banks are moving to sounder footing, the U.S. Treasury’s top international official said.

“There’s a meaningful stabilization of the Greek banks,” Nathan Sheets, undersecretary for international affairs, said in an interview ahead of Saturday’s stress test and asset quality review results.

“The challenging question is, once the stabilization has been achieved, how do we move to the next level, so to speak, where the banks are more resilient and are able to actually provide credit to the economy and support the growth process?” Sheets said Friday afternoon in his Washington office. “That gets into a very important set of issues about governance of these institutions.”

The European Central Bank on Saturday said Greece’s four main banks must raise 14.4 billion euros ($15.9 billion) in fresh capital, as investors and taxpayers face the cost of repairing the damage resulting from six months of wrangling between the country’s government and its creditors. Repairing the financial industry is a central element of the country’s 86 billion-euro bailout, signed in August to keep Greece in the common currency.

Milestones in the financial sector will be the focus of euro-area requirements for Greece to unlock its next payments from the rescue program. Greece is working to tap a 2 billion-euro disbursement in coming days, and a further 1 billion is slated to be paid out in November if Prime Minister Alexis Tsipras can enact the required reforms.

Sheets said Greece has made progress, and faces the challenge of carrying out its pledges and keeping the country moving forward.

“The situation with the banks is clearly better than it was a few months ago, and I’m hopeful that in the months to come we’ll see further improvements and signs of strength,” he said.