February 15, 2019 / 3:11 PM / 3 months ago

Greek banks, government find common ground on foreclosure protection

* Banks, government agree new home foreclosure protection scheme

* Bank supervisory authorities need to give green light

* Scheme to include subsidies on mortgage repayments

By George Georgiopoulos

ATHENS, Feb 15 (Reuters) - Greece’s lenders reached a deal with the government on a new framework that will succeed a current law protecting borrowers from home foreclosures, in a bid to accelerate the clean up of bad loans burdening banking sector, bankers said on Friday.

The two sides reached common ground after lengthy talks, bridging their differences on the parameters of the new legal framework, including ceilings on primary home market values, loan balances and income criteria to qualify for protection.

The current law expires at the end of February and banks have agreed with regulators to take steps to shrink bad loans by more than a third by the end of 2019.

Sour loans on bank balance sheets remain the biggest challenge facing the banking sector, the legacy of a multi-year debt crisis that shrank Greece’s economy by a quarter and drove unemployment near 28 percent in 2013.

In an effort to protect borrowers hit by the crisis and unable to service their loans, the government had legislated a scheme known as the Katseli law to shield them from losing their primary homes.

Bankers told Reuters the new scheme sets a ceiling on the commercial value of primary residences at 250,000 euros ($282,000) and on outstanding loan balances at 130,000 euros.

The loans include plain vanilla mortgages but also loans that have pledged a primary residence as collateral.

The new scheme sets annual income criteria to qualify for foreclosure protection - 12,500 euros for single borrowers, and 21,000 for a couple with no children. The ceiling goes up by 5,000 for each child and hits an upper limit of 36,000 euros.

Based on the new framework, borrowers in arrears will be able to qualify for a haircut on their outstanding loan balance when it exceeds 120 percent of the value of the primary home.

Also, based on income criteria, the government will subsidise part of their monthly loan repayments.

“The big idea is to turn these sour loans back to performing, with a bit of help from the government and with the borrower also resuming repayments,” one banker said.

A senior official told Reuters the government has budgeted 150 million euros for the planned subsidies this year. The amount will rise to 200 million euros annually in the following years.

Based on Greek central bank data, sour loans at the end of June 2018 amounted to 88.6 billion euros or 47.6 percent of banks’ overall loan book.

The so-called non-performing exposure (NPE) ratio of mortgages was 44.3 percent in June, that of consumer loans was 56.9 percent with sour business loans at 48 percent.

“The next step is to get the green light from supervisory authorities before the new framework heads to parliament,” another banker said. (Writing by George Georgiopoulos, additional reporting by Lefteris Papadimas; editing by David Evans)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below