1. Baptism of Fire

The restructuring of Greek debt, known as the Greek PSI, reduced the value of Greek bonds held by the private sector by nearly 80%.

See Chap. 17 for the precise numbers and figures.

See Chap. 17 for more details.

See, for example, Charles Goodhart’s (1988) excellent analysis of central banks in which he explains that the liquidity support by the Bank of England was the result of commercial banks demanding that the Bank of England acted in that way to safeguard the stability of the banking system.

Basel I was introduced in 1988 and focused mainly on credit risk. It stipulated that internationally active banks should have a minimum capital ratio of 8% of risk-weighted assets and introduced five categories of credit, ranging from 0% for OECD government debt to 50% for residential mortgages and 100% for other private debt. Basel II was introduced in the mid-2000s and introduced additional risk categories, as well as three methods for measuring risk depending on the bank’s risk management capacity. It also introduced two additional pillars in addition to the capital requirements pillar: the supervisory review process and disclosure requirements intended to enhance market discipline. Basel III introduced a macroprudential overlay that is intended to address ‘systemic risk’ (the risk of the financial system as a whole, which includes the interconnectedness between financial institutions), which is believed to have led to the Global Financial Crisis, which erupted in 2007–2008.

Details of the tests and results can be found on the EBA website: http://​www.​eba.​europa.​eu/​risk-analysis-and-data/​eu-wide-stress-testing/​2011/​results.

Sarris’ actions suggest that he did not want to break the bad news about Laiki before the changeover of Governor. Prior to that, he gave several interviews in which he made public his support for Orphanides’ reappointment.