Greek Government to Tackle Bad Bank Loans

Greece will take steps to tackle the mountain of bad loans weighing on its banks as part of its deal with international creditors, a draft of the agreement obtained by Reuters showed on Wednesday.

Under a European Banking Authority yardstick, Greek banks’ “non-performing exposures” (NPEs) — which include loans in arrears for more than 90 days (NPLs) and restructured credit unlikely to be repaid — hit 40 percent of their portfolios last year.

The bad-debt load has worsened since then, as Greece sank back into recession and was forced to impose of capital controls, requiring banks to set aside more provisions against the bad loans and constraining them from funding the economy.

Resolving the issue has been one of the major sticking points in talks with creditors.

According to the 29-page memorandum of understanding (MOU), a copy of which was obtained by Reuters, Greek authorities commit to changing corporate insolvency laws to rehabilitate viable debtors and speed up the liquidation of non-viable ones.

Other reforms include stricter screening to deter so-called strategic defaulters from taking advantage of a home foreclosure protection law and increasing the number of judges to address the backlog of insolvency cases.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza