ATHENS – With bad loans in Greece more than 35 percent of bank holdings, the Bank of Greece has nevertheless said it opposes the idea of a single so-called “bad bank,” that would gather up all of them to determine who could pay, as government-imposed austerity measures have left many Greeks unable to afford their debts.
Instead, unidentified sources told Kathimerini, senior central bank officials vehemently object to a national bad bank, suggesting instead that each bank struggling to get people to pay in the face of big pay cuts, tax hikes, slashed pensions, worker firings and record unemployment and poverty should set up separate departments to chase them.
The officials pointed out that the banks, despite the overwhelming number of non-performing loans (NPLs) have been bolstered by 50 billion euros ($67.43 billion) in recapitalization funds provided by the government, diverted from 240 billion euros ($327 billion) in two international bailouts.
The money came through the Hellenic Financial Stability Fund (HFSF) and central bank officials said that any transfer of the NPLs to a new state entity would hurt taxpayers’ interests.
Banks have already set up specialized divisions dealing with NPLs that employ more 1,000 people between them, and it would be particularly difficult and complicated for all these units to be unified.
But while the banks are hounding people who can’t pay – a report earlier this week found that 80 percent of the bad loans are legitimate – they are not going after the New Democracy Conservatives of Prime Minister Antonis Samaras and his coalition partner, the PASOK Socialists, who combined owe them 250 million euros ($337 million) and aren’t paying.
HFSF President Christos Sclavounis had suggested that a bad bank might still be needed but that was pushed aside by central bank officials who wanted no part of that idea.
The Bank of Greece instead is planning to hire the American firm BlackRock as a special consultant to assist in the liquidation of troubled lenders, with the ultimate aim being the maximization of bad loan recovery. The government earlier said it might give business debtors a break on what they owe, but not for personal loans, credit cards and mortgages.
Today all banks under liquidation, such as the “bad” parts of ATEbank, and the scandal-ridden Hellenic Postbank and Proton Bank along with others have their own independent liquidation units that are seeking to recover as many problematic assets as possible.
BlackRock will examine the liquidation units’ current modes of operation and propose general guidelines and optimal practices aimed at accelerating the recovery rate, including timetables and targets. Estimates say more than 2 billion euros of NPLs could be retrieved from bad banks, which is at odds with the reports that most Greeks can’t pay no matter how much they’re badgered.