Greece should complete the reforms needed to help banks reduce bad debt and deal with the impact of the COVID-19 pandemic, the European Central Bank said, according to Reuters.
The coronavirus crisis has stalled the efforts of Greek banks to offload non-performing loans (NPLs), the report says, citing ECB’s mission chief for Greece.
“While it is too early to produce credible estimates regarding the increase in NPLs, it is clear that the impact on banks’ profitability and solvency position may be material,” ECB’s Francesco Drudi told Greek news website capital.gr.
The ECB, the European Commission, and the International Monetary Fund conduct quarterly reviews of Greece’s post-bailout progress.
According to Reuters, Drudi said that Athens should take steps to complete the reforms to support banks in reducing their NPLs, a process that has been set back during the first half of 2020 due to the health crisis and that the process should restart when the economy begins to recover, probably in the second half of the year.
“These actions range from improving legislation in the field of insolvency to improving the framework for e-auctions and to ensuring an efficient functioning of the judicial system,” Drudi said.
The Greek government has designed a state-guaranteed scheme, known as Hercules, to smooth the sale of 30 billion euros ($34 billion) of bad loans repackaged as securities and halve the proportion of bad debts to total loans to under 20 percent by the end of 2021.