Andrew Dobbs, Consultant, TCS BaNCS

What are the implications for financial institutions from a Greek exit from the Eurozone? This article takes you through some of the scenarios and how they may pan out.
So once again the political and economic crises in Greece has reignited, creating further consternation and turmoil within the Eurozone and leaving Greece on the brink of abandoning the Euro.

  • How are the Financial Markets dealing with this uncertainty and the possible risk of a Greek exit from the Eurozone?
  • What are the repercussions for financial institutions holding Greek debt? and
    How will a Euro exit actually work and are there any precedents for leaving an economic and monetary union?
  • Much has been written about the impact on living standards for Greek nationals, the government’s ability to borrow, and what it means for businesses should Greece leave the European Union.

But how will the financial markets react and what can banks do, if anything, to prepare for a Greek Exit (Grexit)?

Financial institutions exposed to the Greek crises need to demonstrate that they are in a continued state of readiness in the event of a number of different and unique scenarios that could conceivably present themselves over the coming months and possibly, years.

Market and credit risk teams, front office, operations, technology and finance departments all need to be able to mobilise themselves quickly and efficiently to deal with the aftermath of an exit scenario.

Banks should now be in the process of Identifying their assets and liabilities that could potentially be affected by redenomination legislation. They will need to conduct some high level, front-to-back due diligence to categorise assets and exposures that may be at risk of redenomination and classify these into different redenomination buckets, i.e. high, medium and low risk.

It would be prudent to engage legal counsel and obtain guidance for each asset class and business stream that is potentially exposed to redenomination risk.

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