Tensions rise between banks, govt over auctions

Tensions are rising between banks and the government over the issue of suspending property auctions until mid-March, as well as legislation that changes the order in which creditors are paid from money earned on asset sales with creditors losing out.

The government is seeking, due to the pandemic, to extend the suspension of all enforcement measures until March 15, while for those affected by the pandemic the ban will be extended until June. Banks have reacted by emphasizing that vulnerable borrowers are fully protected (Katseli law, Gefyra, Gefyra II etc.) and that with the extension they are effectively being blocked for the whole of 2021 on cases that have been pending for years and have nothing to do with the pandemic.

Bank sources point out that among the auctions that cannot take place due to the suspension of enforcement measures and the shutdown of courts are cases that have been pending for many years, such as auctions of assets relating to Michalis Goulandaris, Kostas Boutaris, ERASINEIO Oncology Hospital in Koropi (a case related to a 100-million-euro investment), the former Filmnet building on Kifissias Avenue, many hotel units, etc. According to bank executives, these are cases that started long before the pandemic.

Legislation, which has secured cross-party support, is also raising concerns for bankers, changing the order of priority in which asset sales revenues of are paid with creditors losing the lead. The process of special management provides for the in-service consolidation and sale of troubled companies.

Based on a 2015 law, introduced by the SYRIZA – ANEL government, 10 percent of assets sale revenues go to non-privileged claims (including employees), 25 percent go to state debts and the remaining 65 percent goes to special privileges (collateral), ie banks. With the new legislation, special management cases, such as the one in progress for Skaramanga Shipyards, foresee employees gaining privilege over other creditors.

Banks acknowledge that this is a socially sensitive issue, and stress that it is fair and legitimate for employees to receive the compensation they are entitled to, but note that this should be done through social policy and not by changing legislation that creates legal uncertainties.

They note that significant investments have been made for purchases of non-performing loans by funds, purchases whose pricing was based on legislation and applicable rules. They warn that circumvention of the rules will affect bank efforts to get rid of the burden of non-performing loans and will worsen the pricing of problem loans, weighing on their balance sheets.

With regard to the freezing of auctions, they emphasize that, given that there is also the Gefira I program, in which those borrowers already affected by the pandemic have joined, this ban raises many questions as to whether it is correct. The same sources point out that this horizontal ban will be to the detriment of the economy itself because any increase in non-performing exposures will limit the possibility of new financing and ultimately the growth potential of the economy.