The HFSF is an organization established by the EU, European Central Bank, and International Monetary Fund (often referred to together as the “troika”) to help stabilize the Greek banking sector. It performs a number of functions in pursuit of this goal: supporting commercial bank recapitalization (acquiring bank shares and injecting bonds or cash in return), outlining and monitoring corporate governance reforms at the banks, supporting deposit insurance, and helping to resolve non-performing loans (NPLs), which refer to loans that individuals or businesses stop paying back. The HFSF is slated to run until June 2020, when the banking sector will hopefully be transitioned back to full private ownership.
- Political instability led to financial sector instability. Mr. Tourret emphasized the extent to which the uncertainty that accompanied multiple elections and a referendum on austerity has impacted commercial bank viability. This uncertainty has increased the perception of risk among private investors who may want to purchase bank shares. It has also encouraged Greek depositors to continue pulling their money out of the banking system for fear of its collapse.
- Current capital controls are constraining corporate growth. As restrictive as capital controls can be for individual citizens, they also cause extreme challenges for businesses. All large corporate transactions with overseas counter-parties require approval from the government. This creates an inhospitable environment for starting new businesses or attracting foreign investment. It also discourages Greeks from investing in domestic enterprises. Getting the financial sector on stable enough footing to lift capital controls will be key to jump-starting investment and job growth.