Trade with Greece
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research, in some types of loans
the ratio of non-performing loans
that could be regularly repaid,
based on the financial standing of
the borrowers, stands at 25% to
30%. What is happening is that
these borrowers, despite having the
necessary funds to repay their
loans, prefer to stop servicing them,
in expectation of a, partial or total,
write-off sometime in the future.
This way, they are hiding behind
borrowers who are really in a dire
situation, because they do not have
the money to meet their obligations.
Finally, there is also a category of
borrowers who are willing to pay,
strike a restructuring deal with the
bank, repay one or two instalments,
and then let their loans slip into
default. In many cases, actually,
this is done with the implicit accept-
ance of the banks, which also gain
something out of this process,
because until the loans become
non-performing again, the NPL ratio
has been reduced. And like that, the
can is kicked down the road.
The encouraging fact was that there
had been a decrease in such toxic
lending since early 2016. The dis-
couraging fact is that in early 2017
these loans started increasing
again. This, of course, has sounded
the alarm at the Bank of Greece,
which warns that NPLs must be
reduced by 10%. Otherwise there is
an imminent risk of a new bank
recapitalisation. This 10% reduction
has to be achieved in view of the
stress test announced by the
European Central Bank (ECB) for
the summer of 2018. This stress
test is considered to be one of the
toughest, with Greece’s systemic
banks not having the luxury of fail-
ing it.
In practice, this 10% represents a
reduction of almost 10 billion euros,
which requires lots of preparation
on the legislative level. The main
problem is that the legislation that
would govern the operation of NPL
management companies remains
“under construction”, and the time
remaining until the beginning of the
