BoG plan for slashing NPEs eyes reduction of core capital

The baseline scenario on which the plan of the Bank of Greece for the reduction of bad loans is based – through the use of deferred tax assets – provides for the three-percentage point drop in banks’ Tier 1 Capital ratios to be covered through bond issues in the context of loan portfolio clear-outs.

This is aimed at the creation of a cohesive narrative for the recovery of the Greek credit sector, which in recent months has been the focus of selling moves by investors.

The plan that the central bank will present to the managers of the country’s four systemic lenders on Thursday has been the subject of discussions with the monitoring authorities; the latter may not yet have issued their approval, but they view the prospect of clearing out nonperforming exposures through this particular mechanism in a positive light.