Greece has a lot to learn from Cyprus when it comes to tackling nonperforming loans, as Greek banks face a daunting task in slashing their bad-loan stock by 40 billion euros by the end of 2019, according to their pledge to the European Central Bank.
With three banks already having sold NPL portfolios to foreign funds, and online auctions gathering pace, attention in Greece is shifting to the implementation of legislation regarding out-of-court settlements and the protection of main residences, and to the way banks can make the most of collateral from insolvent debtors.
In Cyprus, banks, the state and judicial authorities have been particularly active in efforts to cut NPLs, with the island’s biggest lender Bank of Cyprus reporting that bad loans have been reduced by over 40 percent in less than three years, according to its director of restructuring and recoveries, Nick Smith. The other main banks, Hellenic and the Central Cooperative, have also shown a satisfactory reduction rate.
In Greece the problems are no longer associated with passing legislation, following recent amendments, but rather with implementing that legislation, observers note. “What the Greek law says is better than in Cyprus, which is heavily reliant on valuations of collateral. The framework in Greece is good enough but must be implemented,” a market source says.
Another factor that has helped in Cyprus, and that Greek lenders are focusing on, is recruiting expertise that will help with asset utilization.
“Given the ECB’s focus on the ambitious NPL reduction targets being met by the systemic banks on a timely basis, and the segmentation and specialization required to deal with such portfolios, it is only natural for Greek banks to use external expert resources such as servicers to handle solutions for both the viable and nonviable companies,” Bill Hancock, managing partner at Resolute Asset Management, told a conference in Athens this week.
Hancock told Kathimerini English Edition that his company has been particularly active in Cyprus, as well as Bulgaria and Romania, and has now started advising Greek banks on its field of expertise, real estate asset management. He actually noted that “Cyprus is like a laboratory experiment, with the Bank of Cyprus affecting such a large part of the economy.” Since 2015, Resolute has handled BoC loans worth more than 2.5 billion euros, but Hancock adds that “Greece is a strategic target market for us.”