Subsidies for loans of €4 bln

By the end of the week, banks are expected to have sent their proposal for supporting vulnerable households with a mortgage to the European Central Bank’s Single Supervisory Mechanism (SSM), in the hopes of gaining its approval.

The nod will not be about the cost of the subsidy, which, according to the forecasts, will be low and will not exceed a few tens of million euros – according to some estimates it will be lower than €30 million. The critical issue for the banks is whether these loans, estimated at up to €4 billion – depending on the final number of vulnerable households that will join – will leave the category of serviced loans and be characterized by the supervisor as non-performing served.

Such a development could, according to the banks’ estimates, lead to an increase in the ratio of nonperforming loans up to 2%, reopening the issue of additional capital requirements in the form of creating additional provisions. It should be noted that the SSM does not consider red loans only those that are overdue for three months or more, but also those that show prospects of default or are regulated in some way even if they are aware.

This risk, according to the view expressed by banks, could be prevented if the state was also involved in supporting vulnerable households, assuming part of the subsidy. That way this measure would pass as a government initiative and receive the supervisor’s approval, a proposal that acted as a red flag for the Finance Ministry, which rejected it.

Among the gray areas that need to be clarified are the exact parameters of the loans that will be subsidized, the method of the subsidy (with the banks studying the creation of a fund through which the subsidy will be distributed) and the time period covered by the subsidy, i.e. if it will retroactively concern the increase in the installment that has existed since last July, when the rise in interest rates began, or if it will be applied to the increases that will exist from the beginning of the year.