The words «loan installment» conjure up nightmares for about 290,000 loan takers who are unable to pay back their loans on time. According to data by the Bank of Greece and retail banks, about one in 10 people who take loans are more than three months behind in their repayments. The total number of loan takers is estimated at 2.9 million. Most of them own at least one credit card. The amount of debt repayments in arrears – from housing, consumer, personal loans, open lines of credit and credit cards – exceeds 3.2 billion euros. Slightly more than half of this amount (1.7 billion) concerns housing loans. This amount is about 5 percent of the total outstanding housing loans, which amount to 38 billion euros. In total, about 700,000 housing loans are outstanding and in 40,000 of them (5.7 percent) there are problems with repayments. There are also 250,000 non-housing personal loans and cards whose payments are over three months late. They amount to 1.4 billion euros or 7.2 percent of the total outstanding sum of such loans, which is about 19 billion. The biggest repayment delays are in credit cards, personal loans and open lines of credit. The sum in arrears in credit cards amounts to 7 percent of the total outstanding card debt, rising to 8 percent for personal loans and open lines of credit, but falling to 6 percent for consumer loans. There are about 5 million credit cards in circulation, in the hands of about 2 million cardholders. Of those, 110,000 card holders do not pay their installments on time and collectively they owe more than 500 million euros. The problem would be even more widespread if 1 million card holders and personal loan takers did not switch banks each year to take advantage of favorable outstanding debt transfer offers. Despite this type of debt refinancing, there are still 110,000 people who have taken personal loans or opened lines of credit who are more than three months behind in their payments. They owe a total of 600 million euros. In consumer loans, which require proof of income and purchase, only 20,000 loan takers are more than three months in arrears but they owe a collective 260 million euros. Companies fare about as badly as individual loan takers. Bank data show that corporate loans over three months overdue amount to 5.4 billion euros or 7.8 percent of the total outstanding corporate debt, which is about 70 billion. Repayment delays have significantly increased lately, causing concern both to the central bank and the commercial banks. In 2003, the rise in delayed repayments was 9.3 percent, accelerating to 16.4 percent in 2004. Bankers estimate that this acceleration continues. Credit explosion The intense competition for market share among commercial banks is largely to blame for the explosion in credit as the Bank of Greece has repeatedly warned. There are fears that this competition has led banks to relax their criteria. This week, the Bank of Greece announced measures that would rein in credit, but, according to market watchers, these should have been taken earlier. On the other hand, commercial banks accuse the central bank of being too interventionist, having increased the amounts the banks must hold in reserve as provisions for bad loans. Commercial bankers insist that, in a competitive European markets, the Bank of Greece’s «conservatism» saddles them with a competitive disadvantage. Recently, however, loan offers (all without supporting documents) have exploded. Offers of cards, open lines of credit and «special loans» for professionals abound. Even housing credit comes with a lot of perks: The banks forgive you engineers’ and lawyers’ fees, allow you not to pay the first installment («a special bonus») and even allow you to start repaying a year after getting the loan. Over the last five years, outstanding housing loans have surged from 11 billion euros to over 37 billion; consumer loans have risen from 5.6 billion euros to 20.3 billion. The relaxation of credit happened at a time of high growth and historically low interest rates. The Bank of Greece fears the consequences of an economic slowdown and a rise in interest rates.