A Finance Ministry bill introduces adjustments to the state’s Hercules asset protection scheme and improvements to the bankruptcy code.
The main change in the bankruptcy law, also known as the “law of second chance,” concerns the extrajudicial debt settlement mechanism, in which nonperforming loans with state collateral may also be included.
The bad loans (NPLs) issued with a state guarantee add up to some 3.5 billion euros, and to date banks have avoided incorporating them in any of the debt settlement programs for fear of missing out on the state collateral.
This issue is set to be resolved now in favor of the debtors through the bill submitted in Parliament, as borrowers will be able to apply for having such loans settled via the out-of-court process, without banks conceding their requirements from the state. The draft law further clarifies the issue of guarantors, who will also be allowed to settle the debts burdening them outside of court.
On the Hercules mechanism, the bill provides for the extension of guarantees (worth some €12 billion) until October 2022, allowing for more loan secutizations.