ATHENS – With some 40 percent of loans gone sour during a more than eight-year economic and austerity crisis, Greek banks are trying to deal with getting rid of them either through more lenient repayment plans or selling them off to collectors and now another plan is in the works.
That could include a government guarantee under the scheme being formulated by the ruling Radical Left SYRIZA-led coalition after a mini-crash in the Athens Stock Exchange it blamed on a report from the Bloomberg financial news agency, one of the media reporting the new plan.
The proposal, the news agency said, would see banks unload some bad loans into special purpose vehicles, taking them off banks’ balance sheets. The SPVs would issue bonds, some backed by the state, and sell them to investors, the people said, asking not to be named.
A sell-off of loans saw the value of Greek banks fall more than 40 percent this year with many of the loans going to political parties or businesses who didn’t account for where it went. The former ruling New Democracy and its previous coalition partner, the now-defunct PASOK Socialists, owe more than 250 million euros ($288.09 million) but aren’t being pushed to pay and the loan officers who provided the monies without getting sufficient collateral in return were given immunity from prosecution.
While Greece’s biggest four banks cleared a European Central Bank-led stress test earlier this year, they are under more pressure lenders are under mounting pressure from supervisors to cut their bad-debt holdings so they can extend credit and help support economic growth.
The Greek government said in a statement it is in touch with the financial stability fund and the Hellenic Bank Association and is promoting “a specific plan of actions which includes — among others — the further reduction of bad loans.”