The credit risk management for cooperative banks during Greek economic crisis: a comparative analysis with Greek systemic banks

Greek cooperative banks suffered during the crisis period, related to Greek debt and adjustment programs accompanied the financing of the country by the European Union, the European Central bank and the International Monetary... [ view full abstract ]

Greek cooperative banks suffered during the crisis period, related to Greek debt and adjustment programs accompanied the financing of the country by the European Union, the European Central bank and the International Monetary Fund. Greek cooperative banks, as all other Greek banks, had to face the problems created by the credit risk since banks’ borrowers or counterparties failed repay their loans. A main consequence of those problems reflected to obligations on the capital requirements according to new regulatory frameworks, known as Basel II requirements. Capital inadequacy provoked the failure of some Greek cooperative banks since they did not succeed to achieve the Basel II capital requirements and they did not receive the financial involvement of the Financial Stability Fund. The FSF on the contrary offered the necessary capital to the four systemic banks in Greece.
The paper examines the credit risk for the Greek cooperative banks through a comparative analysis based on the examples of two cooperative and two systemic banks. The examined cooperatives banks were two of those who accomplished the capital requirements. The paper examines the evolution and structure of exposure values of these banks focusing on the crisis period 2011-2014. It is interested to investigate which the differences and similarities are within cooperative and commercial banks. Cooperative banks’ exposure values concentrate to medium and high risk weight contrary to commercial banks that have an important part of exposure values to limited risk weight because of important exposure values to central government bonds. The risks to which banks are exposed determine the capital requirement; the paper examines the evolution of this capital for those banks during the crisis period.