Greek banks will write off debts of 3 billion euros from nonperforming mortgage, consumer and small corporate loans by the end of the year. By the end of 2019, the amount to be struck off is expected to total 14 billion euros.
Debt write-offs will constitute an important instrument for clearing out the banks’ nonperforming loan portfolios, starting with old loans that not been serviced in more than two years. The “forbidden” discussion about loan haircuts has been formally started by debt management companies, while for banks the subject has been kept low-key, even in cases where they have written off debts.
That taboo will be sidestepped by companies such as Cepal, as the joint venture set up by Alpha Bank and Spain’s Aktua will be the first to start clearing out bad loans. Cepal will initially administer a portfolio of 1.5 billion euros, comprising 50-60 percent guaranteed loans while the rest will mainly be made up of consumer loans without collateral. Later on 2.5 billion euros will be added to the Cepal portfolio and by the end of the year the joint venture will employ a total of 200 people who will undertake communication with clients to recover as much as possible of the amount that currently remains unpaid.
Banks are expected to place emphasis on long-term solutions through arrangements that will not deal with the problem for the first one or two years. Having the experience of the eight-year-long crisis, which is getting deeper instead of ending, bankers are convinced that they should proceed to solutions that deal with the problem over a longer period, for all debtors and for all loan categories.
Such an approach would not exclude write-offs, even for loans that do have collateral. The amount to be struck off will be agreed from the outset, but will only be implemented at the end of the contract and only after the borrower has fulfilled their commitments to the bank.