by Chiara Albanese
January 12, 2015
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
Among the firms running through drills are,
Goldman Sachs Group Inc.
brokerage ICAP PLC,
...according to people familiar with the
The firms' plans include,
detailed checks on
counterparties that could be significantly affected by a
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
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
"Italy could follow Greece's steps
if the exit will prove successful in providing some relief to
the country's economic crisis," he said.