Bank officials are expressing many reservations and concerns concerning the new framework for the settlement of debts, for individuals and legal entities, as presented by the government in the consultations process.
Although bank officials are currently avoiding making any negative public comments, there are concerns on this issue, sources say.
The legal departments of banks, as well as external advisors, have many objections to the bill and warn that if there are no corrective interventions, it can evolve into a new Katseli law, which created problems for the country’s banks.
The main concern is the possibility of the so-called Preventive Restructuring clause in which even up-to-date borrowers can proceed with via which a simple application, based on the current form of the bill.
Banking sources told Business Daily that the new procedure does not presuppose the existence of financial weakness for the borrower, creating a risk of strategic defaulters taking advantage of the law and the creation of a new generation of non-performing loans.
According to the current rules, the exemption of the borrower must be done in court, while with the new one, the exemption comes automatically through the relevant procedure and only if there is an appeal from a bank can it be challenged. Banks are also worried about the debt relief time, which was set at one year compared to 3 as requested by lenders.
They also point out that many of the provisions regarding the mechanisms and procedures are doubtful as to whether they can be applied in Greece given the country's many inefficient control mechanisms. Bank officials add that the Katseli law also had many positive elements in its design, however the courts were unable to implement it properly, resulting in it being abused by many.
It is worth noting that the general assessment of banks for a new institutional framework for debt settlement is positive and they are optimistic that problem areas will be smoothed out in the consultations process.
“Major reform intervention”
Government officials describe the proposed institutional framework as a "major reform intervention" that will put an end to overlending to the private sector, a problem that has not been addressed for years and is suffocating the economy.
In total, businesses and households owe about 230 billion euros, an amount that significantly exceeds GDP, which at the end of 2019 amounted to 187.5 billion euros. The lion's share of the debts are to the tax authorities, which amount to 106 billion euros, followed by debts to banks, amounting to about 90 billion euros, and 35 billion euros to social security funds.
Yesterday, Prime Minister Kyriakos Mitsotakis, during his introductory speech at the beginning of a cabinet meeting, underlined that: It sets a realistic, fair, socially sensitive framework concerning the first home and paves the way for settling debts to the state, to the funds, to banks, which total 234 billion euros. This is the amount of private debt today in Greece."
"From January 1, 2021, then, weak debtors will be able to settle their debt favorably or it will be written off. But based on criteria, starting with the abolition of confidentiality for each asset of the interested parties, so that the necessary crosschecks can be made, and strategic defaulters are not rescued, as, unfortunately, has happened repeatedly", he added.
Referring to the issue of the primary residence of vulnerable people, he stressed that the new regulations have a strong social nature. "Especially for the debts of vulnerable individuals and the self-evident moral commitment of the state to secure their residence, the provisions of the bill have a strong social sign. Maybe that is why they are prompting resistance from banks," he stressed.
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