The international community has postponed bank stress tests for Greece to give the country breathing space as Athens prepares to test the success of its European roadshow last week by raising more money in the capital markets.
The so-called “troika” – the International Monetary Fund , European Commission and European Central Bank – has agreed with Greece’s central bank to delay testing the solvency of the country’s struggling bank sector by one month to the end of October.
The delay means that the banks’ nine-month results could be assessed, as well as the outcome of a $2.23 billion capital raising by National Bank of Greece, the country’s largest lender, which is due to be completed next month.
“A successful offering by NBG would boost investor confidence?...?It would also accelerate mergers and acquisitions already under discussion,” said a senior Greek banker.
A short-term auction of three-month bills on Tuesday will test whether the Greeks and troika officials have made any headway in convincing overseas investors that they should buy the country’s debt.
One investor said of the meeting in London on Wednesday last week: “The IMF official was particularly impressive and convincing, although there are still big question marks over whether Athens can avoid defaulting on their bonds.” IMF officials were unavailable for comment on Sunday.
Greece borrowed more than $ 1.3 billion in the capital markets on Tuesday last week in its first debt issue in two months.
Although Athens had to pay very high rates for six-month loans in a sign that the problems for Greece and the eurozone are far from over, nearly a third of the buyers were international investors, according to debt managers.
In the past, demand has been almost entirely from local banks.
Greek officials say the increase in international buyers is a positive sign for Athens, although bond yields have remained stubbornly high in the past week.
Ten-year government bond yields ended the week at 11.54 percent after jumping three days in a row.
This compares with about 4.5 percent in September last year before Greek officials admitted they had misled the EU over the country’s public finances.
Stress tests were conducted by the Committee of European Banking Supervisors, a European umbrella body, on 91 European banks in July.
However, the tests were seen as lacking in rigour by many bankers and investors because they only measured the impact of haircuts on Greek government bonds in the so-called trading books.
Government bonds in the so-called banking books, which are typically held to maturity, were not covered.