Banks unhappy with bad loans bill

Bank officials are expressing serious reservations about the efficiency of the government’s bill regarding nonperforming corporate loans, arguing that the target set by the Development Ministry for the adoption of the payment plans by 160,000 enterprises cannot be met.

The main objection expressed concerns the exclusion from the draft law’s final text of the incentive that would reduce the interest rate, as well as that cutting fines and penalties on debts to the tax authorities and the social security funds.

These objections will be discussed at the next meeting of the Hellenic Bank Association when it is expected to decide on the final proposals to be submitted in the form of observations to the Development Ministry. The banks’ thinking is that, according to the information currently available, the bill does not create a favorable framework that would offer incentives to debtors.

The final text contains no reference to the incentive for the interest rate subsidy, which would provide for the settlement of debts to banks in 100 or 120 installments – i.e. in up to a decade, improving the chances of the smooth repayment of debts. The text has also brought down the discount on the penalties for debts to the tax authorities and the social security funds from the original 100 percent to just 20 percent.

The bill has left negotiations between debtors and banks to the banks’ discretion. Although the full liberty granted to creditors is interpreted as strengthening their negotiating position, banks believe that this will not help with the handling of the problem of bad loans, as that would require a general tackling of the issue through incentives and procedures that would lead to a generous settlement of debts.

In this way the bill will shift all the responsibility to the banks, which without being armed in any way to tackle bad loans will need to draft a sustainability report for each enterprise.

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