Morgan Stanley: Banks are on the right course

Morgan Stanley sees that while steps have been taken to drastically reduce Greek banks’ bad loans, several obstacles remain in their way. The international bank’s report on Monday followed meetings between Morgan Stanley officials and representatives from the country’s four systemic banks, as well as from Grivalia, the Bank of Greece and the Hellenic Financial Stability Fund.

Morgan Stanley continues to believe that Greek banks will achieve their NPE reduction targets by 2021, but this effort – regardless of the creation of a “bad bank” – will have to be boosted by the amendment of the Katseli law so as to encourage more defaulters to restructure their loans.

The changes planned for the Katseli law are generally perceived as positive but do have some problems, says Morgan Stanley. Although the criteria for the protection of debtors’ main residences are expected to become stricter, the law’s catchment will be expanded, also covering corporate loans secured against primary residencies.

The investment bank’s report adds that there are several obstacles to the implementation of the bad-loan securitization plans by the HFSF and the Bank of Greece, with the latter’s plan seen as more radical in that it also addresses the controversial issue of deferred tax credits.