Talks on nonperforming loans close to conclusion
Creditors not happy with plan for a bad-bank alternative
The government appears close to an agreement with its creditors on the issue of nonperforming loans, as the representatives of the country’s lenders are said to have accepted the main points of the Economy Ministry’s proposal. However, they still harbor reservations regarding the creation of an entity to manage the bad loans, a subject to be revisited after banks have been recapitalized.
A major sticking point in the talks is home repossessions as, according to sources, Athens wishes to pass a law to suspend them even for the transitional period until a solution to the problem of household overindebtedness is found, while the creditors apparently seem to want to retain the ban based on the infor- mal understanding with the banks.
It is almost certain that in the next phase the ban on primary residence auctions will only concern particularly vulnerable social groups in the form of a general safety net for them. The European Central Bank had also suggested such a measure in spring in response to the ministry’s original bill on home auctions.
The main points of the ministry’s proposal, as drafted by investment bank Nomura, are the following:
The creation of a Public Authority for Solvency Accreditation, which will assess and grade debtors based on their entire debts and their servicing, not only to banks but also to social security funds, the tax authorities and utilities.
Changes to the legislation on overindebted households and corporate loans, with the creation of courts exclusively for households in trouble, the automatic rejection of insufficient applications and the alignment of the 2014 law on business loans with the legislation on settlement of debts to the state.
The foundation of an asset management company that will effectively be an alternative form of a bad bank. This proposal has met with reservations from the creditors, but has not yet been rejected.
The upgrading of the Government Council for Private Debt Management, creating a new information network for debtors.