By A. Doga
Greece’s four systemic banks are reportedly considering a goal of reducing non-performing loans (NPLs) by seven to eight billion euros until the end of 2017 as realistic, with their individual and collective performance on the specific front viewed as a milestone on the path to meeting other sector goals until late 2019.
First results from the ongoing period point to progress by Piraeus Bank and Eurobank in managing their portfolios of “bad loans”, with National Bank and Alpha Bank also expected to report progress by the end of November 2016.
Over the coming three-year period, 2017-2020, Greek banks will aim for an ambitious target of roughly 40 billion euros to be cut from the NPLs total. The method will reportedly use a combination of write-offs (15 billion euros); restructuring (15 billion euros), sell-off of NPLs to distress funds (seven to eight billion euros) and liquidations (five to six billion euros).
Write-offs of NPLs worth three billion euros are expected by the end of 2017, with restructuring of two billion euros worth of NPLs during the same period also provisioned. Additionally, another two billion euros in liquidations are forecast until the end of 2017, but only a meager sale of NPLs to distress funds.
The target for 2017 is judged as modest, with increased scrutiny falling on the subsequent two years, where the targets are greater and are considered by economic analysts as a critical factor for the improvement of the entire macroeconomic environment in the crisis-plagued country.
However, the weight of the endeavor to reduce the massive debt piled up through NPLs – which now exceeds 100 billion euros – will also fall on the current leftist Greek government. The latter is tasked with revising the antiquated Greek bankruptcy code and enacting a new legal framework to allow for out-of-court settlements as well as a liberalization of the framework to allow the purchase and management of NPL portfolios by distress and investment funds.
The aforementioned reforms, in fact, are more-or-less memorandum-mandated obligations and the focus of ongoing negotiations between the Greek side and institutional creditors’ representatives.
In other words, the government must pass the reforms in order to conclude a second review of the Greek program (third bailout) and allow their unhindered implementation so that the Olympus-sized “mountain” of debt strangulating Greece’s credit system begins to recede.
