* IMF says Greek banks need 10 bln euro capital buffer
* Says banks' bad loans pose potential risks
* Bank of Greece says IMF view is "unduly pessimistic"
By George Georgiopoulos
ATHENS, Feb 8 Greece's central bank is disputing
the International Monetary Fund's view that the country's banks
need a 10 billion-euro capital buffer to cover any further
bailout support, saying the IMF does not explain why such
support would be needed.
In an annual review of Greece's economic policies released
on Tuesday, the IMF said that the buffer is needed because of n
remaining risks to banks' asset quality and a "still bleak"
prospect for profitability.
"Staff has maintained its assumption from May that a buffer
of around 10 billion euros, 5.5 percent of 2016 GDP, should be
set aside to cover potential additional bank support needs," the
IMF said in the report, which was released on Tuesday.
It said that despite successive recapitalisations that
pumped about 43 billion euros, equaling close to 25 percent of
GDP to Greece's public debt since 2010, the banks' balance
sheets remain vulnerable to high levels of bad loans.
Another IMF concern is that half of Greek banks' capital
comprises so-called deferred tax assets, which it views as
contingent liabilities of the state.
The Bank of Greece disputes this. It says the IMF is "unduly
pessimistic" in its macroeconomic and fiscal projections and
that it played down the progress achieved in the banking sector.
"As far as banks are concerned, the Fund assumes that they
will need a further 10 billion euros capital buffer without
explaining why this is the case," Bank of Greece Governor Yannis
Stournaras said in a statement attached to the report.
He noted that the Bank of Greece and outside supervisors
such as the European Central Bank have assessed Greek banks to
have CET1 ratio - used as a requirement of protection - of more
than twice the statutory requirement.
The Bank of Greece also estimates that the attainment of
medium-term bad debt reduction targets it has agreed with the
country's lenders - Alpha <ACBr,AT>, National, Piraeus
and Eurobank - will further increase the
CET1 ratio "substantially."
Greek banks have agreed with regulators on ambitious bad
debt reduction targets spanning a 3-year time horizon.
The lenders are aiming to cut their so-called non-performing
exposures (NPE) to 66.7 billion euros by 2019 from 106.9 billion
euros in September 2016, meaning their NPE ratio to fall to 34
percent from 51 percent.
(Reporting by George Georgiopoulos Editing by Jeremy Gaunt)