On the occasion of statements in the public dialogue regarding the issue of deferred tax of Greek banks, the Bank of Greece, within the framework of its responsibilities as a supervisory authority and with a view to safeguarding financial stability, would like to clarify the following:
• Banks today do not have taxable profits because their profits are offset against the losses of the economic crisis. Based on the European institutional framework, Greek legislation provided (in 2014 and subsequently in 2017) that deferred tax may form part of the regulatory own funds of credit institutions, through the provision of a guarantee by the Greek State in return for a fee paid to it.
• The amount of deferred tax that is recognized for supervisory purposes arose from the large losses suffered by banks during the economic crisis, mainly from the “haircut” of Greek bonds (PSI), and from the large write-offs of non-performing loans. Based on the current tax legislation, these losses may be deducted from their future profits over time. This specific amount of deferred tax that is recognized as regulatory capital is amortized gradually each year, in accordance with the provisions of Greek legislation.
• Without the arrangement recognizing deferred tax as capital, the capital requirements and therefore the burden on the Greek taxpayer during the crisis period would have been much higher, with negative consequences for fiscal stability, debt sustainability and the country's ability to exit the crisis. Simply put, instead of the Greek State paying additional capital again for the recapitalization of banks, it introduced the arrangement recognizing deferred tax as capital.
• With the aim of improving the quality of their regulatory capital more quickly, from 2025 the 4 significant banks are applying, for supervisory purposes, accelerated amortization of deferred tax. Specifically, they make an additional supervisory adjustment, reducing their regulatory capital by an amount equal to 29% of the projected dividend distribution to shareholders.
• Recently, a proposal was put forward for a further acceleration of the amortization of deferred tax, so that banks begin paying tax sooner. It was stated that from 2028, banks should not be able to offset their taxable profits with deferred tax, otherwise an extraordinary levy would be imposed on them. This proposal raises serious questions as to the way it would be implemented and the effects on the Greek banking system.
In the event of a significant acceleration of the amortization of deferred tax compared with the timelines defined by law, Greek banks would be led to write off the relevant unamortized balance from their balance sheets. This would cause a corresponding reduction in accounting equity and consequently significant regulatory capital shortfalls, as they would no longer meet the required capital ratios. This would have serious implications for financial stability, that is, for the protection of deposits and the ability of banks to provide loans to the economy.
• The significant deterioration of the financial figures of Greek banks would also have a serious negative impact on their investment characteristics as well, further hampering the attraction of investor interest to cover capital needs (due to the write-off of deferred tax), while it would also affect the ability to finance the economy, as they would not be able to continue credit expansion due to capital shortfalls. The negative impact would extend beyond credit institutions as well, as legal certainty and the country's investment image would be affected.
• The constant reintroduction of the issue into public discourse creates serious questions. The restoration of confidence in the banking system in the period after 2015 was a significant achievement of governments, supervisory authorities and bank administrations. The solvency of the banking system constitutes a cornerstone for economic and financial stability.