The Bank of Greece on Tuesday issued a dramatic call for immediate action on tackling nonperforming loans, stressing that any more lost time will have serious consequences on the real economy and make the country’s return to sustainable growth that much more difficult. It warned, in short, that the scale of NPLs means the crisis may turn into a credit sector crisis.
In a report on the state of the banking system, the central bank revealed that in the first quarter of the year the quality of the lenders’ portfolios deteriorated further, with the sum of bad loans climbing to 45.1 percent of all loans against 44.2 percent in December 2015 and 39.9 percent in December 2014.
Worse still, the BoG anticipates a further increase in NPLs in the course of 2016. It says this is likely even in the case that overall financial conditions stabilize, as there is always a significant time delay between an economic rebound and the reduction of bad loans.