ECB issues bad-loan warning


European Central Bank Executive Board member Benoit Coeure on Friday gave the Greek government and the country’s banks a clear warning on nonperforming loans (NPLs) but suggested that the International Monetary Fund will not succeed in its demand for local lenders to undergo asset quality reviews (AQRs).

Coeure argued there are problems in the handling of bad loans and asked for all tools to be utilized. He made particular reference to the need for the rapid processing of online property auctions, avoiding any further delays and the broad use of the extrajudicial debt settlement mechanism.

He went on to respond to the IMF demand that banks undergo new AQRs, saying there is no need for an emergency review. Coeure added that the planning of European authorities provides for stress tests across Europe, which will also examine the peculiarities of Greek banks in depth, both regarding the high level of NPLs and the assessment of collateral and liquidity conditions.

Despite the banks’ insistence that the NPL reduction targets for 2017 will be met, it is clear that the creditors do not view the progress made as satisfactory, leading to the call for a greater effort with the use of all tools available.

Sources say that a meeting on Tuesday between senior bank officials and the ECB took place in a negative atmosphere, with Frankfurt officials doubting the efficiency of lenders in tackling NPLs and warning that time is running short – saying that unless they achieve some positive results quickly the consequences will be serious.

Nevertheless, cooperation between the ECB and the IMF has intensified, allowing them to find some common ground, upon an initiative by the governor of the Bank of Greece, Yannis Stournaras, too. Coeure said the objective is to respond to the Fund’s concerns on the issue of the banks.

The IMF has been arguing in favor of a greater capital injection for Greek lenders for years, and the amount of 10 billion euros is often mentioned. However, bank officials underscored in comments to Kathimerini that the 2015 stress test by the ECB was not disputed by anyone at the time.