ECONOMY

SSM frets over debt freeze

ssm-frets-over-debt-freeze

Banks are asking the regulatory authorities for new moratoriums on corporate and household loans repayments for those hurt by the second lockdown, but the European authorities appear reserved.

The issue is already being discussed behind the scenes and the request will soon be submitted formally to the competent watchdogs – i.e. the European Central Bank’s Single Supervisory Mechanism (SSM) and the European Banking Authority (EBA) – which have the final say on issues of horizontal effect such as a debt freeze.

Kathimerini understands that the demand for the extension of the payment freeze into 2021 could concern specific sectors directly hurt by the lockdown, and to what extent this measure would also cover households whose loans have frozen since April remains unknown.

Greek banks have frozen the repayment of some 400,000 debtors’ performing loans, adding up to 26 billion euros. The sole support granted to corporations is that the tranche payments for their loans have been suspended, with them only having to pay the interest. For households, meanwhile, the measures provided for the full suspension of payments, provided they have been hurt by the crisis.

Given that the moratoriums remain in place, the European regulatory authorities have not yet expressed their position. However, sources say that the SSM appears to be reserved about a horizontal expansion of the measure in the way it was adopted in April. After successive lockdowns around Europe, the pressure is strong and discussions are set to increase in the coming days, ahead of the gradual expiry of suspensions from the first wave of the coronavirus pandemic.

The new lockdown and the ensuing economic deterioration are also forcing banks to downwardly revise their estimates concerning the levels of new bad loans from this crisis. Banks’ original estimates in late September pointed to new bad loans of €5-7 billion, but that is already seen as unrealistic. The question is how many of the loans worth €26 billion will turn nonperforming.