State NPE scheme to double in size

Bad loans worth 30 billion euros are being prepared for transfer to the asset protection scheme (APS) that the Finance Ministry is creating.

This is twice the original amount provided for, a development that highlights the government’s resolve to tackle the problem of banks’ nonperforming exposures.

Deputy Finance Minister Giorgos Zavvos, who is in charge of the project, has been in constant consultations with local banks, the European Central Bank’s Single Supervisory Mechanism (SSM) and the European Commission’s Directorate-General for Competition (DGComp) in a bid to see the new scheme take in the highest amount in bad loans possible.

Kathimerini understands that the loans, which will be destined for securitization, will reach 30 billion euros, against the 15 billion initially proposed and the 20 billion considered later.

The NPEs of the country’s four systemic lenders dropped to about 78 billion euros at the end of June 2019, but they remain at particularly high levels despite the brave efforts to reduce them through sales and other means.

The doubling of the amount to be transferred to the APS for securitization is aimed at the fastest possible streamlining of the credit system so that it can release its potential for the financing of households and corporations.

Speaking to Bloomberg on Thursday, Prime Minister Kyriakos Mitsotakis’ chief economic adviser, Alexis Patelis, confirmed the government’s intention to adopt the Italian model and proceed to the creation of the APS, supplying state collateral for a section of the loans to be transferred.

Although he did not state the amount of bad loans that will be included, pointing to the ongoing talks with the DGComp, he spoke of a drastic cut in the banks’ stock of NPEs.

The expansion in the amount of NPEs to enter the APS to 30 billion euros will also raise the amount of collateral the state will have to provide for the senior notes (i.e. guaranteed bonds) to be issued upon the securitization process.