Greek plan to reduce bad loans by €30 billion approved by EU
The European Commission has approved a plan by Greece to offload billions worth of bad debt held by Greek banks.
The European Commission (EC) has approved a proposal to reduce the size of non-performing loans held by Greek banks by €30 billion.
‘I welcome that with the Greek government we have a found a market conform solution to tackle the stock of non-performing loans weighing on the balance sheets of Greek banks,’ EU Commissioner for Competition Margrethe Vestager said.
Project Hercules helping Greek banks cut bad debt
The EU launched the Hercules Asset Protection Scheme which will reduce the size of bad loans weighing down Greek banks balance sheets without distorting the market through state aid.
‘If a Member State intervenes as a private investor would do and is remunerated for the risk assumed in a way a private investor would accept, such interventions do not constitute State aid,’ the EC said in a statement.
‘The Commission therefore concluded that the Greek measure does not involve State aid within the meaning of the EU rules.’
Greek lenders follow in Italy’s footsteps to offload bad debt
Lenders in Greece are eager to reduce a bad debt pile of around €80 billion so they can begin lending and return to profitability.
Greek banks will follow Italy’s GACS model, which will see lenders’ bad debt packaged up into asset backed securities via special purpose vehicles (SPVs).
The purchase will be financed by notes issued by the SPVs with a government guarantee for senior tranches, though state involvement will remain limited, the EC said.
‘The risk for the state will be limited since the state guarantee only applies to the senior tranche of the notes sold by the securitisation vehicle,’ the EC said.
‘The state guarantee on the senior tranche will only become effective if more than half of the non-guaranteed and risk-bearing riskier tranches have been successfully sold to private market participants,’ it added.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.