Banks against out-of-court plan for borrowers

Banks and bad-loan servicers expressed their opposition to the out-of-court settlement mechanism included in the new bankruptcy code, in the context of the discussion of the bill at the Parliamentary Committee for Economic Affairs on Friday.

Although all speakers, including Bank of Greece representative Ilias Plaskovitis, agreed that merging the various clauses regarding the bankruptcy of individuals and enterprises is a step in the right direction, there was a strong reaction to the regulations regarding individuals, while the opposition parties focused their criticism on how substantial the protection of borrowers’ main residences will be.

Greek lenders, speaking through Hellenic Bank Association President Giorgos Hantzinikolaou, voiced their opposition to the option of including individual borrowers in the extrajudicial debt settlement mechanism, arguing that “the individuals should seek relief from their debts only through bankruptcy.”

Hantzinikolaou noted that there is an ethics code that applies to individual borrowers, therefore before a loan is called out and the assets associated with it are liquidated, “there are many opportunities for debtors to have their arrears arranged in bilateral cooperation with their bank.” Therefore, he stressed, “we do not agree in principle with individual borrowers having an out-of-court settlement mechanism for their debts unless they satisfy the conditions of having a genuine and permanent inability to service their debts.” In any case, “we do not agree to pay debtors to have that option,” he added.

The association’s chief defended arrangements made on a bilateral basis with borrowers, which during the pandemic have led to the suspension of tranche payments for 370,000 debtors with total loans of 20 billion euros. Another €12 billion of loans have been bilaterally settled since July 2019.

Hantzinikolaou further highlighted the fact that nonperforming loans in Greece amount to 30% of banks’ portfolios, and in absolute figures they amount to €61 billion, while the average rate in the eurozone – at least in the pre-coronavirus period – stands at just 3%. Therefore, NPLs constitute a barrier to the financing and support of the real economy, he concluded.