Market not convinced over SPVs
Gov’t plan for asset protection scheme raises many questions and doesn’t have creditors’ approval
Thursday’s euphoria at local banks proved short-lived, despite the mobilization of the government and regulatory authorities, as the pressure on bank stocks returned yesterday – sending their sector’s index down 1.78 percent – while experts say a bad bank might be preferable to the kind of asset protection scheme being prepared by the government.
The Finance Ministry’s plans for the creation of special-purpose vehicles (SPVs) on which lenders will offload some of their bad loans (and therefore take them off their financial reports), with the SPVs issuing loans that could be guaranteed by the state, have not convinced the markets; instead they have raised new concerns, as no one is certain about the results of such a measure.
Yesterday’s public denial by the European Stability Mechanism (ESM) of any involvement in the scheme made things worse, as it signaled that the country’s creditors have not issued their approval for the plan.
“The ESM is following closely the latest developments in the Greek financial sector as part of its obligations as Greece’s largest creditor. However, press reports about the ESM being part of preparatory work for a possible intervention plan in favor of Greek banks are wrong,” read the ESM statement.
Analysts argue that a solution along the lines of Italy’s bad bank would have been preferable in the case of Greek banks too. Michael Hewson, chief market analyst at CMC Markets, told Kathimerini there are many question marks over the plans for the creation of SPVs: Who will guarantee those loans? Will the SPVs have the financial support of the government? Who will buy them? The sale of such loans to private investors will not be an easy proposition, he added.
Also speaking to Kathimerini, Wolfango Piccoli, co-president of Teneo Intelligence, said that the creation of the SPVs will help, but will not resolve the problem. Still, the main question is whether the Greek state can offer the necessary collateral for such a plan, but this may have a negative impact on the fiscal front, and that could not proceed without the creditors’ consent.