A Finance Ministry bill tabled in Parliament provides for the abolition of a number of special rights of the Hellenic Financial Stability Fund (HFSF), including the right to veto remuneration policy if a bank has a nonperforming loan (NPL) ratio below 10%. The bill extends the life of the HFSF until 2025, a period during which its divestment from banks will have to be completed.
Regarding salaries at banks, the HFSF veto right is extended into 2022. This provision was made after the revelation by the prime minister’s economic adviser, Alex Patelis, that some banks tried to retroactively approve the provision of bonuses to board members.
According to the provisions of the bill, “for as long as the NPL ratio to total loans exceeds 10%, or for the financial reference years up to 2022, the fixed salaries of the chairman, the managing director and the other members of the board of directors, as well as those who hold the position or perform the duties of general manager and their deputies, may not exceed the total of the respective salaries of the governor of the Bank of Greece.”
The bill also stipulates that “all types of variable remuneration (bonus) of the same persons are abolished until the completion of the restructuring plan submitted to the EU, in the framework of the approval process of the capital assistance program or for as long as the NPL index exceeds 10%.”
The NPL ratio, which is defined as a criterion for the removal of the veto by the HFSF, is a noticeable difference compared to the nonperforming exposures (NPE) ratio, on the basis of which the banks are monitored by the European Central Bank’s Single Supervisory Mechanism (SSM). The former refers to loans that have been overdue for more than 90 days, while the latter to bad loans that have been settled and serviced, but due to SSM rules still remain in the orange area for possible default in the future.
Therefore the bill sets a more flexible rule for the abolition of the veto by the HFSF, based on the NPL index, which all banks have already achieved.