Frozen debts are thawing out

The landscape is changing for the hundreds of thousands of loans subject to a repayment moratorium since the start of the pandemic in Greece.

The debtors in question, whose loan repayment obligations have been frozen until the end of the year, will now have to return to their lenders and start paying their dues again based on the reduced installment programs that will be activated in the new year.

The measures after the end of the moratorium and the course of bad loans were among the issues discussed in a video conference between Finance Minister Christos Staikouras and his Deputy Giorgos Zavvos and Greek bank managers.

By the end of September banks had suspended the dues from loans adding up to some 25 billion euros. Given that the repayment freeze concerns about a quarter of performing loans, banks believe they have now exhausted the capacity of new loan inclusion. Therefore the option of the measure’s extension recently granted by the European Banking Authority (EBA) will only have a limited application, mainly concerning enterprises damaged by the recession.

The suspension period runs up to a maximum duration of nine months, and the grace period is set to expire for many households and enterprises, depending on when it started.

A considerable section of debtors who have taken a mortgage and secured a moratorium have applied to enter the Gefyra program of state protection and subsidy. They are 160,000 borrowers who must stop their moratorium and start repaying at least a part of their tranches along with the state subsidy. The same applies to mortgage holders who are not receiving a state subsidy – in those cases the banks will grant them the option of paying a smaller tranche as of next month for a period of six months or more.

Friday’s video conference also discussed the possibility of expanding the scope of the mechanism for the securitization of nonperforming loans to include some new NPLs, depending on the needs and the amount of bad loans after the end of the pandemic, as well as on the capital burden on the banks.