The Bank of Greece is contemplating the creation of a single “bad bank” to merge all the loan portfolios of banks under liquidation such as ATEBank, Hellenic Postbank, Probank, Proton and certain cooperative banks. The aim of the central lender is to maximize the amount that can be recovered from their assets.
The BoG has commissioned a study by BlackRock Solutions to this end. The investment management firm has proposed centralized management of all liquidation procedures and the drafting of a timetable and quantifiable targets for the acceleration of the process, as well as outlining the best possible outcome.
Should this process go ahead, it will result in one so-called “bad bank” which will be responsible for handling the bad loans of lenders that have been absorbed by other banks in recent years. BoG sources clarify that the single entity will only concern banks that have been under resolution status and should not be confused with the overall management of nonperforming loans in the banking system. They add that the possibility of the creation of a bad bank to handle all of the system’s nonperfoming loans has been ruled out, saying that the four systemic banks – via the specialized departments they have created – are responsible for clearing out their portfolios and handling their bad loans.
Currently, the clearing out of the bad parts of ATEBank, Hellenic Postbank, Proton etc, is being conducted by independent entities that seek to retrieve part of the problem assets. Greece’s creditors have criticized the way banks’ resolution has been handled and have demanded changes that will speed up procedures.
Bank sources argue that the target will be the recovery of some 2 billion euros from the nonperforming loans of the bad banks. However, the central administration, through specific timetables and targets, could fetch a far greater amount and in a shorter period of time. In this context it may be private companies that undertake the management of those portfolios.
The Hellenic Financial Stability Fund (HFSF) has spent some 14 billion euros to cover the funding gap of banks placed in resolution in recent years.