Assessment Report – Praise for red loans, bankruptcy law concern

The institutions may have praised the reduction of Non-Performing Funds (NPLs) of Greek banks, but they sounded the alarm for the arrears with the bankruptcy.

According to the 11th Economic Assessment Report, in the context of enhanced supervision by the Commission and the European Central Bank, the impact of the pandemic on the banking sector has so far been limited, thanks to measures taken by the Greek and European authorities.

Non-performing loans

For non-performing loans, it is underlined that the marginal deterioration of the relevant index in the first quarter of 2021 (increased to 30.3%) is expected to be reversed in the following quarters due to further securitization.

The reason for the slight deterioration was the increase in new non-performing loans in the first quarter of the year, especially in the category of corporate and consumer loans. By the end of June 2021, three more transactions were completed under the “Hercules” program, reaching a total portfolio of securitized non-performing loans amounting to approximately 17 billion euros.

The four systemic banks plan to allocate an additional 24 billion. euros of non-performing loans until the end of 2021, taking advantage of the recent extension of the “Hercules” plan. Their goal is to achieve single-digit non-performing loan ratios by 2022 at the latest.

The success of these ambitious reduction plans depends on a number of factors, the institutions say, such as the scale of new non-performing loan inflows, future economic growth and overall market conditions.

For the bankruptcy law

Institutions note that the initial signs are encouraging, but it is too early to assess the effectiveness of the new procedure, as the new bankruptcy law has been in full force since June 1, 2021, while eight ministerial decisions remained pending until the end of August. and improvements to the law were made in July.

The new out-of-court debt settlement process, as noted by the institutions, attracted strong interest, with 23,996 active applications by the end of August.

Regarding the creation of the fund that will buy the main houses of borrowers from auctions and lease them to the debtors to avoid eviction, the institutions point out that the relevant process has been further delayed, until the end of September 2022