Reserved approval of BoG blueprint for bad loans


Foreign banks Morgan Stanley, IBG and Deutsche Bank have raised questions regarding the plan that the Bank of Greece presented on Thursday with the aim of reducing local lenders’ bad loans, saying the idea is positive under certain conditions.

The issues brought up by Morgan Stanley relate to the price at which the nonperforming loans will be transferred to the special purpose vehicle (SPV) the central bank will create, and to whether the difference in the nominal and face values of the bad loans transferred and the collateral granted through the transfer of deferred tax assets are sufficient for the candidate investors and for banks themselves.

The main issue raised by Deutsche Bank and IBG is the impact the plan will have on the Greek banks’ capital, with Deutsche highlighting that banks may find themselves in a weaker capital position, and IBG appearing reserved on the level and rates of the SPV’s coupons given what is described as the weak structure of the vehicle’s assets.