Greek Deputy Finance Minister George Zavvos on Tuesday defended the government’s decision to support the “Hercules” plan for the reduction of non-performing loans instead of a so-called “national bad bank” that would absorb all NPLs.
Speaking in Parliament, during a debate on a draft legislation for micro-funding, Zavvos said that a plan to create a bad bank has been examined by both the Bank of Greece and others. “It is possibly a useful idea, but not of the moment,” since there are two big problems.
The first is whether a bad bank should be created on a European or a national level. On a European level, a bad bank should be undertake a burden of 500-600 billion euros worth of NPLs with the cost covered by European funds – a decision unlikely to be reached in the EU. On a national level, a bad bank would have a fiscal cost of around 10 billion euros and this cost would be placed upon Greek taxpayers.
On the other hand, he said, “Hercules” is the top choice and a success of the Greek government, exactly because it shifts the burden of the project to the investor and not to the Greek taxpayers.
He added that another argument against the idea of creating a bad bank is the fact that the supervisory cost will be heavy on banks.