by Chiara Albanese
January 12, 2015

from OnusNewsGR Website



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.

Among the firms running through drills are,

  • Citigroup Inc.

  • Goldman Sachs Group Inc.

  • brokerage ICAP PLC,

...according to people familiar with the matter.

The firms' plans include,

  • detailed checks on counterparties that could be significantly affected by a Greek exit

  • looking at credit exposures

  • 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 anti-austerity 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.



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