Strate­gic de­fault­ers sit­ting on 10 bln

Banks see NPLs grow on cul­ture of de­lib­er­ate re­fusal to pay debts in hopes of fa­vor­able set­tle­ments

Kathimerini English - - Focus - BY YIANNIS PAPADOYIANNIS

Twenty-one per­centof all non­per­form­ing loans in Greek banks’ port­fo­lios, worth more than 10 billion eu­ros, con­cern bor­row­ers who will not pay their dues de­spite be­ing able to in an­tic­i­pa­tion of some form of fa­vor­able ar­range­ment.

Bank of­fi­cials es­ti­mate that the bulk of these strate­gic de­fault­ers are house­hold debtors, as out of a sum of 20 billion eu­ros in res­i­den­tial mort- gage NPLs, 30 per­cent (6 billion) con­cerns bor­row­ers who have seen the cri­sis as an op­por­tu­nity and are re­fus­ing to pay their dues – even though they can. The NPLs in cor­po­rate credit total 28.9 billion eu­ros, of which an es­ti­mated 15 per­cent (4.3 billion) con­cerns strate­gic de­fault­ers.

The pre­dom­i­nance of house­hold strate­gic de­fault­ers is at­trib­uted to the sys­tem­atic en­cour­age­ment by the “I Won’t Pay” move­ment in pre­vi­ous years and the po­lit­i­cal ex­ploita­tion of the is­sue through prom­ises ex­tend­ing to “Seisachtheia” (the An­cient Greek term for debt for­give­ness) and across-the-board debt write­offs.

Ac­cord­ing to banks, the law in­tro­duced by for­mer econ­omy min­is­ter Louka Kat­seli shook the very ground­work of the lo­cal credit sys­tem as it not only sanc­tioned un­law­ful be­hav­ior but also cre­ated an army of strate­gic de­fault­ers. In 2010 the gov­ern­ment en­acted a law which lacked the clear cri­te­ria that would rapidly de­ter­mine whether a bor­rower had a se­ri­ous prob­lem or was just try­ing to take ad­van­tage of the cri­sis. There­fore there are more than 150,000 ap­pli­ca­tions from in­di­vid­u­als hop­ing to reap the ben­e­fits of the Kat­seli law that re­main pend­ing in courts to­day, and some will not be heard be­fore 2032.

How­ever, even in the busi­ness sec­tor there ex­ists the para­dox of very wealthy en­trepreneurs who con­trol overindebted en­ter­prises. There are strong in­di­ca­tions that in some cases loans were taken out for busi­ness pur­poses but were then trans­ferred to per­sonal ac­counts in banks abroad.

Although ex­pec­ta­tions of debt for­give­ness or wide­spread hair­cuts have waned, the em­bold­ened men­tal­ity that it is some­how right not to pay one’s dues re­mains strong, as in the case of the block­ing of home auc­tions. Fur­ther­more, the de­lay in the def­i­ni­tion of the le­gal frame­work al­lows for debt write­off hopes: Bank of­fi­cials say the steep rise in NPLs in Jan­uary was partly due to ex­pec­ta­tions that out-of-court debt set­tle­ments would be in­tro­duced.

Newspapers in English

Newspapers from Greece

© PressReader. All rights reserved.