“A step toward the right direction to reduce the moral hazard in the country,” is how Intrum Justitia Group Chief Executive Mikael Ericson describes the agreement between the Greek government and the country’s banks concerning the amendment of the so-called Katseli law for the protection of debtors.
In an interview with Kathimerini, the head of one of the largest European nonperforming loan servicing companies says that the group’s plan in Greece is to be independent and to benefit both the lenders and borrowers, as the former will be getting paid for products and services they have sold, and the latter will recieve assistance to improve the state of their finances.
Intrum has acquired two large nonperforming loan portfolios in Greece. Are you also considering the option of becoming active as a portfolio servicer?
Indeed, we tend to have both portfolio investments and debt servicing platforms in the markets where we operate. In that sense, Greece is somewhat different.
However, we are considering a variety of options and more recently we have applied for a debt servicing license with the Bank of Greece. With that said, we have recently hired an experienced country manager, Akis Bis from the Cepal Group.
We are also looking at other alternatives, one potentially being to buy a licensed debt servicing platform, another to do a carve-out from a local bank, or even to build a platform of our own.
Based on your experience from other countries, what are the obstacles standing in the way of the effective management of the NPL problem in the Greek market? How do you assess the recent agreement regarding the protection of primary residences?
As you might already be aware, Intrum, which is headquartered in Stockholm and is listed in the Nasdaq exchange, is the industry-leading provider of debt management services with a presence in 24 European countries, including Greece.
Our company employs approximately 9,000 professionals who serve our customers throughout Europe, generating pro-forma revenues amounting to 13.4 billion Swedish Krona, or 1.26 billion euros in 2018.
There are both similarities and differences between European debt collection markets. One difference is related to the market maturity in terms of regulation of collection processes and consumer protection legislation, as well as how predictable and rapid the legal processes are. Greece has made clear progress in all these areas and it is likely that the market will become more mature and efficient in the coming years.
One major obstacle in the Greek market is the absence of independent debt servicing platforms. All established major platforms for concentrating debt in Greece are today affiliated or embedded within the local banks. In all major European markets independent debt servicing platforms secure professional collection practices and enable a market for the sale of NPL portfolios. Intrum can contribute toward this direction.
The recent agreement between the Greek government and the banks on the amendments of Law 3869/2010, known as the Katseli law, is a step toward the right direction. I believe that this will help banks and servicers to address more effectively the operational problems of the law and reduce moral hazard.
What, in your opinion, is the most effective way to address the problem of nonperforming loans in Greece without affecting the capital adequacy of banks?
A long-term solution to the NPL problem is part of creating a sound economy. Social perception is a crucial factor for the financial industry, and a well-functioning, robust and connected regulatory framework that supports debtors and credit providers is of fundamental importance for all countries, and will lead to healthier practices for banks and credit management companies alike.
With Intrum’s ethical collection practices in place, we focus on the important services we provide both for individuals and for companies. We support credit providers by helping them get paid for sold products and services, while at the same time supporting individuals to improve their financial situation.
If banks keep debt on their balance sheet and try to service it themselves, they are likely to have to raise expensive capital that generally does not improve their collection efficiency.
If, on the other hand, they sell their debt to us, that will improve their capital adequacy ratios and they can focus entirely on their business in the issuance of new loans and credit to the real economy, while we support them by focusing on what we know how to do best.
In Italy, Intrum’s cooperation with Intesa led to the establishment of a joint venture to which part of the nonperforming loans were transferred. How can this model work in Greece?
The Intesa joint venture came from a comprehensive bilateral discussion aimed at creating a long-term strategic relationship for both parties. It should be seen as an example of how one can structure profitable solutions and models in the future. But it is important to remember that these are large and complex transactions that need to be tailored for local requirements.
Combining our knowledge and experience from different countries in Europe with the knowledge of a leading local financial institution has proven to be very efficient and value creating both for clients and customers.