By Laura Noonan and George Georgiopoulos
ATHENS, Oct 9 (Reuters) - Greek banks will have to provethey have enough capital to withstand another two years ofrecession under the "adverse" scenario of stress tests beingcarried out in Athens, Greece's central bank governor GeorgeProvopoulos told Reuters.
The tests on the country's four largest banks, all majorityowned by Greece's bank rescue fund the Hellenic FinancialStability Fund (HFSF), are being carried out to check if thissummer's 28 billion euro ($38 billion) recapitalisation has leftthe banks capable of dealing with future shocks.
Greek banks have seen their non-performing loans swell to 28percent of their total loan books, as six years of consecutiverecession wiped 25 percent off the country's output, whileGreece's bailout programme demanded wage cuts and tax hikes.
Greece expects to return to marginal growth in 2014.
"Under the baseline scenario, which represents our forecastand the troika's forecast, Greece will return to growth in2014," Provopoulos said in an interview, referring to theEuropean Commission, European Central Bank and InternationalMonetary Fund collectively.
"Under the adverse scenario, growth kicks in in 2016, withsmall negative growth rates until then."
The adverse scenario from Greece's 2011/2012 stress testswas exceeded, but Provopoulos said the latest adverse scenarioshould not be interpreted as a forecast in this year's tests,which are being carried out on National Bank of Greece, Piraeus, Alpha Bank and Eurobank.
Alpha Bank Chief Economist Michael Massourakis said it wouldbe a "grave mistake" to take the 2013 adverse scenario as aprediction. "It was like the universe conspired to produce theBlackrock adverse scenario (from 2011)," Massourakis said,referring to the U.S. consultancy which carried out the reviewin 2011/2 and is doing the 2013 version as well.
"This will not be the case this time round."
Provopoulos said he was "increasingly optimistic" about thefuture of the eurozone, including Greece, with 2014's expectedreturn to growth promising a "positive impact on overallconfidence" that would boost spending and investment.
Greece may have to agree a third bailout programme becauseit will not have enough money to meet spending in 2014 and therehas been speculation that the cash could come from the bankbailout fund.
"It is imperative that the unused funds amounting to between8 to 9 billion euros remain available as a backstop for thebanking sector," said Provopoulos.
- Budget, Tax & Economy
- Central Banks
- George Provopoulos