Greek banks are set to suffer extra pressure in the coming days, including on their stock prices, after the European Central Bank issued strict guidelines for the reduction of their nonperforming exposures portfolios or their coverage with provisions.
As the banks index at the Greek stock market lost over 5 percent of its value on Tuesday, Frankfurt told eurozone banks, including those in Greece and Italy that have huge NPE portfolios, to make provisions for their entire set of bad loans, both those created during the course of the financial crisis and those to arise this year.
Based on the ECB guidelines, if Greek banks do not offload their NPLs from their financial balances, they will have to double their provisions, with a serious impact on their capital indexes. Today the provisions of Greek banks amount to 50 percent of bad loans, which total some 85 billion euros.
Local banks are now focusing on the new institutional framework concerning the protection of borrowers’ main residences that the lenders are preparing with the government. The key issue is the minimum value of auctioned main residence, which currently stands at 120,000 euros.