The banking sector is in a much better position relative to the past to deal with potential turbulence. However, maintaining inflation at an even higher levelin combination with the increased prime rates and slowdown in the rate of economic growthtests the resilience of households and businesses and may contribute to the creation of new non-performing loans (NPLs), notes the BoE in its financial stability report.

At the same time, he emphasizes that the escalation of geopolitical risks, the persistence of inflationary pressures, the slowdown in the rate of economic growth, but also the risk of a sharp revaluation of assets in the international money and capital marketsretain risks to financial stability in a high level.

The recovery of the investment grade for the country’s credit mitigates the risks for the financial system, while the outlook for the Greek banking sector is positive.

The high uncertainty and risks prevailing in the international financial environment leave no room for complacency. The upgrading of the Greek State’s debt to investment grade, combined with its low financing needs for the next two years, and the strengthening of the sizes of the banking sector, mitigate the risks to a large extent.

However, any sharp deterioration in international financial conditions may cause turbulence with adverse effects both on the financial situation of businesses and households and on the Greek banking sector. Therefore, the importance of continuing the course of consolidation and further strengthening the main dimensions of the financial system, combined with the implementation of appropriate micro- and macro-prudential supervision measures to strengthen and ensure financial stability, is highlighted.