Banks and other
financial institutions in Europe are stress-testing their internal systems and
dusting off two-year-old contingency plans for the possibility that Greece
could leave the region’s monetary union after a key election later this month.
The firms’ plans
include detailed checks on counterparties that could be significantly affected
by a Greek exit, looking at credit exposures and testing how they would provide
cross-border funding to local operations.
Some firms are also
preparing for the impact on payment systems and conducting trial runs of
currency-trading platforms to see how they would cope with adding a New Greek
currency or dealing with potential capital controls.
The moves come as
Greek leftist opposition party Syriza continues to lead in recent public
opinion polls ahead of national elections on Jan. 25. The ruling coalition
government has framed the election as a de facto poll on whether the country
stays in the eurozone, saying Syriza’s antiausterity policies would force a
break with eurozone partners. Syriza, though, hasn’t campaigned on an exit and
most Greek voters want to stay in the monetary union, according to recent
polls.
Most analysts still
say the chances of a Greek exit are quite low. Economists at Commerzbank rate
the chances on an exit at below 25%.
“Hope for the best,
plan for the worst,” said Frederic Ponzo, managing partner at consultancy Grey
Spark. Financial firms often test their systems for events such as a rapid
change in oil prices or the recent referendum on Scottish independence, he
added.
At some European
banks, that currently means dusting off plans drawn up a couple of years ago,
when a eurozone breakup was a hot topic. In 2011 and 2012, banks, brokers and
companies with significant exposure to Greek assets put in place contingency
plans to minimize the fallout from a breakup.
In late 2011, former
ICAP Chief Executive David Rutter said the firm had stress-tested its currency
trading platform EBS for all 17 currencies that would have resurfaced in the
case of a complete breakup of the eurozone. The brokerage conducted similar
tests earlier this month, two people familiar with the matter said.
Other European banks
are running similar tests on trading platforms to ensure they would be capable
of dealing with a rash of new currencies, according to several people familiar
with the matter.
The head of currencies
trading at a large European bank said that reintroducing the Greek drachma to
its trading system wouldn’t be too difficult, but dealing with a larger breakup
would be more challenging.
“Italy could follow
Greece’s steps if the exit will prove successful in providing some relief to
the country’s economic crisis,” he said.
(Πηγή: wsj.com)
