At the outset, the deterioration in the macroeconomic environment, sovereign debt downgrades and rising sovereign spreads rendered access to international capital and money markets impossible for both the banks and the sovereign. Extremely tight liquidity conditions ensued and pressures on the banking sector grew. In this adverse macroeconomic landscape, unemployment increased to historic (post-war) levels, and disposable income dropped substantially.
As a consequence, the adverse developments in the banking sector were unprecedented; in particular, Greek banks’ fundamentals and asset quality ratios deteriorated substantially.