May 11, 2020 5:42 pm

Greece is working on bad bank

Corona crisis: new NPLs worth 10 bn euros expected

Greece is also massively affected by the effects of the COVID 19 pandemic, for example the travel and hotel industry. Tourism normally contributes more than 20 percent of Greek GDP. But this year, it is likely that the majority of guests will stay away. It is uncertain how many companies will survive this downturn. Most of the companies in this sector are weakly capitalized. A wave of insolvencies would have serious consequences for the banks – and they are only just recovering from the consequences of the financial crisis.

In the meantime the volume of non-performing loans on the balance sheets of Greek banks has fallen to below 70 billion euros – from more than 100 billion euros in 2006. Industry experts expect that the corona crisis again will lead to loan defaults of around ten billion euros. At the same time, there are delays in NPL securitizations under the “Hercules Plan“.

The Greek government is therefore currently drawing up plans for a bad bank to supplement the “Hercules Plan” in order to support the banks in the current crisis. All NPLs of the financial institutions are then to be transferred to this state bank. By the end of May, the Bank of Greece intends to announce details of the planned introduction of the bad bank. Ekathimerini

This post was written by Jens Secker

(Image rights: istockphoto.com/anyaivanova)

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