The Bank of Greece is drafting a plan to reduce Greek banks’ non-performing loans by 40 billion euros. The plan will be included in a Financial Stability report to be released by the end of the week, according to sources.
The plan will include, among others, the transfer of half of the capital resulting from a deferred tax to a special purpose vehicle (SPV), which will issue bonds to buy non-performing exposures of a nominal value of around 40 billion euros from the four Greek systemic banks, thus reducing Greek banks’ NPLs stock by half.
The plan has already been presented to the European Central Bank, the Single Supervisory Mechanism, the European Commission’s Competition Directorate and the Greek finance ministry. Implementation of the plan also requires that legislation be passed by the government.
The advantage of the plan, Bank of Greece officials said, is that a deferred tax cannot be considered as state support to banks.
An alternative plan to reduce NPLs by 15-20 billion euros has also been presented by the Financial Stability Fund, based on the so-called “Italian model” that operates on guarantees offered by the Greek state using part of unused capital of the third bailout programme.
Greek banks’ managements have pledged to the SSM to reduce their NPLs by 60 pct by the end of 2021.