Latest proposal to shield Greece's 'bad debt'-laden systemic banks called 'asset protection scheme'

The Greek government, in close consultation with its institutional creditors, now appears ready to take a pressing initiative to deal with systemic banks' "mountain bad debt", in the wake of this week's "Black Wednesday", which witnessed a mass sell-off of bank shares at the Athens Stock Exchange (ATHEX) and the sinking of the banking index.

According to government sources on Thursday, the finance ministry's leadership is now considering a recommendation by the Hellenic Financial Stability Fund (HFSF) to create an "Asset Protection Scheme", what the former describe as a "small portion of the government's overall strategy to deal with bad debt."

The latest, albeit unofficial, indications of intent by the leftist-rightist coalition government came on the same day (Thursday) as a Bloomberg report maintained that Athens was considering the establishment of a "bad bank", along the lines of a model previously used in Italy.

Bloomberg reported that the Greek side is considering guarantees of up to 15 billion euros to cover a portion of systemic banks' NPLs in such a "bad bank".

The all-important details in such a plan foresee, according to reports at least, that whatever guarantees, of up to 15 billion euros, will come from a nearly 25-billion-euro "cash buffer" accumulated by the Tsipras government over the past year or so as a backup, in case Athens finds sovereign borrowing from the markets too expensive and unpredictable.

Such a plan would ostensibly allow Greece's thrice recapitalized systemic banks - National Bank, Eurobank, Piraeus Bank and Alpha Bank - time to recover all or a portion of the 15 billion euros worth of NPLs.

At the same time, this sum is automatically removed from banks' results, improving their ratio of capitalization and relevant indexes.