By A. Doga
Greek banks are reportedly ready to “tighten the screws” on so-called “strategic defaulters”, both businesses and individuals, who are estimated to account for 20 billion euros worth of non-performing loans (NPLs) in the country.
The pressing issue of accumulated “bad loans” in crisis-swamped Greece has taken on massive proportions, literally asphyxiating the credit market. Institutional creditors, in fact, have repeatedly pressured the Greek government to liberalize the framework to allow the sale of NPL portfolios to the secondary market.
The initial idea, according to sources, is to target the most egregious cases of “strategic defaulters” through legal action.
The proposed “legal blitz” comes in tandem with resumed court-ordered foreclosures and property auctions, as banks have provisioned a reduction in NPLs of between five and 10 billion euros until the end of 2019.
Bank executives estimate that property still held by “strategic defaulters” is worth billions and an easier target than hundreds of thousands of mortgages linked with primary residences, and where in many cases borrowers can seek legal protection by citing real economic hardship.
In terms of business NPLs, selling off a corporate entity held by shareholders to reduce exposure appears as unlikely, as proposed legal changes will allow banks to insert shareholders if current shareholders refuse to participate in share capital increases – a prospect only held out only for businesses deemed as “viable”.
According to bank sources, even the genuine threat of a foreclosure-cum auction will drastically affect the entire NPL sector, with the target being “strategic defaulters”.
Liquidation of assets and the possible sale of NPL portfolios to distress funds, at present at least, is not considered as being able to generate revenues to cover banks’ losses, bank executives told “N”.
Another development on the horizon is a pending submission of draft legislation in Parliament outlining the out-of-court settlement process in cases of non-serviced loans, a process that is expected to “weed out” long-term strategic defaulters, whom banks estimate total 20 percent of the total of NPLs in the country.
