Banks fear that nonperforming loans (NPLs) will rise to above 10 percent, reaching possibly 12 percent, in the last quarter of the year and for all of 2011, as household disposable income continues to drop and unemployment numbers rise. The increase of loans in arrears, expected to reach 22 to 26 billion euros, out of the total of 222 billion euros owed, is the biggest headache for banks right now. Data from the Bank of Greece shows that total outstanding loans held by households in 2009 rose 2.1 percent despite eroding household income levels. This means that total outstanding credit, as a percentage of gross domestic product (GDP), rose to 72.8 percent, from 70.9 percent. The figure is lower than the eurozone average, which stands at 95.4 percent, but still needs to be carefully monitored. A reason why this figure may pose a threat to banks is the sector’s lack of experience in handling NPLs in similiar crises and its inability to make reliable forecasts for bad loans. The European Central Bank recently forced six Greek lenders, those that took part in the European stress tests, to adopt NPL forecasts for provisions of around 13 billion euros for the 2010-2011 period. The Bank of Greece, which plans to conduct its own stress tests on Greek lenders in September, is concerned about the rise of new loans in arrears to 3.9 percent at the end of 2009, up from 2.4 percent in 2008. The index measures the likelihood of a loan not being repaid, however it is not affected by the rate of credit expansion and loans being written off. At the end of March this year, the percentage of NPLs reached 8.2 percent of total credit, boosting the amount of bad loans to 20 billion euros.