Greek banks have sharply increased their holdings of government bonds in recent years, but their exposure to rising yields should remain manageable because most of those securities are held to maturity, according to credit-rating firm DBRS.
Government bonds on Greek banks’ books were equivalent to nearly 300% of their common equity Tier 1 capital, a key measure of financial strength, in June 2026. That compares with less than 100% in June 2019.
The ratio is above the 264% average for banks across the European Union and European Economic Area, but below levels in Portugal, Italy and Spain, where government-bond holdings stood at 367%, 361% and 342% of CET1 capital, respectively.
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Despite the increase, DBRS sees limited immediate risk from the recent rise in sovereign yields.
More than 80% of government bonds held by Greek banks are accounted for at amortized cost, meaning lenders generally intend to hold them until maturity. As a result, increases in market yields—and the corresponding declines in bond prices—don’t automatically translate into losses on their income statements or capital.
That compares with 59% of sovereign bonds held at amortized cost among EU and EEA banks overall.
Greek lenders also have diversified away from their home government. Greek sovereign debt accounted for less than half of their government-bond portfolios in June, down from more than 60% in 2019.
DBRS said the shift partly reflects banks’ search for yield and diversification opportunities. It could also weaken the so-called sovereign-bank nexus, in which stress in government finances can spill directly into domestic lenders.
One potential source of vulnerability is duration. Greek banks have the highest share of government bonds with maturities exceeding five years, at 71%, compared with 46% across EU and EEA banks. Longer-duration bonds are more sensitive to changes in interest rates.
Still, holding such securities at amortized cost can help stabilize banks’ net interest income during periods of rate volatility. Greek banks hold only a small single-digit percentage of their bond portfolios for trading, according to DBRS.
The rating firm said European banks’ sovereign exposures remain substantial and could become more sensitive if yields continue rising. But it expects the overall effect to remain manageable.
