Banks demand stricter protection rules

Banks demand stricter protection rules

Greek banks are proposing that the protection limit on the objective value of debtors’ main residences be reduced to 100,000 euros in the context of the Katseli law.

That would signify a drastic decline from the current level that starts at 180,000 euros and can rise up to 280,000 euros depending on the number of children in a household.

The issue was discussed on Tuesday at a meeting between bank officials and representatives of the country’s creditors that centered on the extension of the law named after former economy minister Louka Katseli concerning the protection of debtors’ main residences.

Talks also focused on the extension of the extrajudicial mechanism for debt settlement by another year.

Sources say the banks raised the issue of reducing the limit in exchange for their agreement to extend the protection order – that according to the Katseli law expires on December 31, 2018 – by another year.

Bank data show that the current limits cover 95 percent of mortgages issued – effectively making the law’s criterion a blanket settlement for all applicants instead of distinguishing those in real need of protection.

Some 150,000 applications have already been made for the settlement of debts or main residence protection that remain pending, and the view that strategic defaulters have exploited the protection limit is widespread.

According to Bank of Greece figures, the share of nonperforming exposures protected by the Katseli law comes to 14.4 percent, representing over 12 billion euros.

The highest rate, reaching up to 30 percent, concerns mortgage credit, and debtors with loans of more than 8 billion euros have applied for protection of their main residence.

Tuesday’s meeting further discussed the progress of the extrajudicial mechanism and the extension of the legislation concerning it that also expires at end-2018.

The extension is deemed necessary after the amendments introduced to the law so that more enterprises, freelance professionals and farmers can benefit from it.

The process is proving very slow, as to date 1,557 businesses have applied to enter the mechanism, but only 75 have actually secured the settlement of their debt.

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