The European Central Bank has given its nod to a change in the legislation concerning deferred tax credits of banks, relieving the local credit system from the risk of the state triggering the recapitalization clause in case of losses.
Therefore, banks will secure the necessary leeway for more aggressive moves in reducing their nonperforming exposures, and potential investors in Greek bank stocks will no longer face the threat of their holdings getting diminished in case of recapitalization.
After three months of negotiations, the ECB approved the draft regulation submitted by Deputy Finance Minister Giorgos Zavvos. The new amendment stipulates that unless there are sufficient profits or if there are losses making the offsetting with the deferred tax credits impossible, the difference may be rolled over to the next financial year when there will be sufficient profits recorded. This shift may be made to any financial year within the 20-year amortization period the legal framework provides for.
The ECB decided that this amendment was necessary in order to tackle potential effects from the rapid deleveraging of the Greek banking system.