ECB: Greece needs reforms to help banks cut bad debt

Greece should complete reforms to help its banks deal with the impact of the coronavirus crisis and reduce their bad debt, the European Central Bank’s mission chief for Greece said in an interview released yesterday. The coronavirus crisis, which is seen dragging Greece into a deep recession, has stalled Greek lenders’ efforts to offload a portfolio of nonperforming loans (NPLs). “While it is too early to produce credible estimates regarding the increase in NPLs, it is clear that the impact on banks’ profitability and solvency position may be material,” the ECB’s Francesco Drudi told website capital.gr. Drudi said that the Greek government should complete the reforms to support banks in reducing their bad debt, a process which has stalled during the first half of 2020 due to the health crisis and which should restart when the recovery takes place, probably in the second half of the year. “These actions range from improving legislation in the field of insolvency to improving the framework for e-auctions and to ensuring an efficient functioning of the judicial system,” he said. Greek banks had been counting on a state guaranteed scheme, known as Hercules, to smooth the sale of 30 billion euros of problem loans repackaged as securities and halve the proportion of bad debts to total loans to under 20% by the end of 2021. Drudi said that it was essential that additional tools were “thoroughly explored.”