BoG rejects single bad bank

Lenders have created their own units to deal with nonperforming loans and their merging would be difficult By Yiannis Papadoyiannis

Sources from the Bank of Greece have categorically ruled out the creation of a single “bad” bank that would gather all the commercial lenders’ nonperforming loans (NPLs), which add up to some 35 percent of the total, under one roof.

If anything, senior central bank officials are making no secret of their displeasure with the persistence of talk about a national bad bank, stressing that the issue had been examined two years ago and a decision had been reached that the best option would be for the creation of internal departments within each lender to deal exclusively with the bad loans in its portfolio.

The same sources pointed out that the banking sector has been bolstered by the 50 billion euros administered by the Hellenic Financial Stability Fund (HFSF) and that any transfer of the NPLs to a new state entity would constitute an arrangement that would go against taxpayers’ interests.

Banks have already set up specialized divisions dealing with NPLs that employ over 1,000 people between them, and it would be particularly difficult and complicated for all these units to be unified.

The issue of the creation of a single bad bank returned to the forefront last week after statements by the president of the HFSF, Christos Sclavounis, who did not rule out such an option. However the government and the Bank of Greece were quick to refute that.

The central bank is in fact planning to hire BlackRock as a special consultant to assist in the liquidation of troubled lenders, with the ultimate aim being the maximization of bad loan recovery.

Today all banks under liquidation, such as the “bad” parts of ATEbank, Hellenic Postbank, Proton etc, have their own independent liquidation units that are seeking to recover as many problematic assets as possible.

BlackRock will examine the liquidation units’ current modes of operation and propose general guidelines and optimal practices aimed at accelerating the recovery rate, including timetables and quantifiable targets to be met. Estimates say more than 2 billion euros of NPLs could be retrieved from bad banks.