Greek banks are stepping up their effort to reduce their stock of non-performing exposures, i.e. loans not serviced for at least 90 days and those unlikely to be repaid, as stocks of the local credit sector continue to suffer in the Athens bourse.
In this context, the country's four systemic lenders (Alpha, Eurobank, National and Piraeus), have proceeded to a joint effort to lure debtors away from the provisions of the legislation that offers them protection for their main residence, while sales of bad-loan portfolios to funds continue.
After reaching their target for NPE reduction for the year already from end-September, the Greek banks have now committed themselves to new, even more challenging targets for slashing their exposures by end-2021 to their regulator, the Single Supervisory Mechanism (SSM) of the European Central Bank.
Greek state broadcaster ERT reported this week that banks have agreed and started offering several borrowers who have entered the protection status of the so-called Katseli Law (after former economy minister Louka Katseli) a major haircut to their mortgage or consumer loans.
The reduction of dues for the approximately 120,000 debts reaches up to 40-45 percent for housing loans, and to 80 percent for consumer loans, provided they are secured on the main residence of the borrowers and that the debtors do not own any other major assets that could be liquidated.
"This is definitely a step in the right direction by banks, who feel arm-twisted by the SSM so as to act on their bad-loan stock quickly and efficiently," Giorgos Stratopoulos, an Athens-based analyst for think tank E-Kyklos told Xinhua on Thursday.
The Katseli Law has created a backlog of borrowers under protection from confiscation of their main residence, who expect their case to be heard in court in 2019 or even 2020, and repay nothing in the mean time.
"However banks had better come out officially, under the auspices of the state so as to add prestige to such an initiative, and say they are offering borrowers a single arrangement that is not going to be repeated or improved in three, six or nine months, aiming to convince them to exit the Katseli Law protection and enter a payment plan that would boost banks' revenues," added Stratopoulos.
Another way for banks to improve their takings has been the sale of bad-loan portfolios, with Eurobank announcing on Tuesday the concession of a package of 181,000 loans originally worth 2 billion euros at about 6 percent of its original value.
The price paid by the consortium of B2Holding ASA with Waterfall Asset Management is quite an improvement from the previous package Eurobank sold in 2017 at 3 percent of the original value.
Alpha, National and Piraeus are also preparing NPE portfolios for sale to funds, their officials confirmed.
According to the central Bank of Greece in end-June, NPEs in Greek bank portfolios added up to 88.6 billion euros (102 billion U.S. dollars), or 47.6 percent of total exposures.
The bank stock index in the Athens Exchange has lost 47.64 percent of its value in the last six months. (1 euro = 1.15 U.S. dollars)
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