Arrangements with ‘haircut’ for 8 out of 10 red loans

By Leonidas Stergiou

The management companies have now passed the red loan arrangements in order to turn them into serviced ones and return them to the banks. Already, since the beginning of the pandemic, red loans of 3.8 billion euros have been consolidated and are currently on the banks’ balance sheets. In this way, management companies, banks and borrowers earn double.

The process of consolidation and repayment to the bank as a viable and serviced loan takes almost 12 months, as the period that remains a loan to the management company to monitor the consistency varies. This is because according to the latest data from the Bank of Greece, the pattern that followed the regulations was the following:

– 20% of the regulated loans turned red again after three months.

– 35% of the regulated loans became non-performing again after one year.

These percentages in non-long-term arrangements, ie those that did not have a significant haircut and extension, were doubled. Dose suspension and subsidy programs have reduced default rates, which currently range around 20% in housing and consumer and around 25-30% in business. Also, servicers, especially in business, in addition to haircuts and extensions, seek cooperation with other companies in the industry.

From the data of the period 2020-2021, the management companies have settled 8.5 billion euros in loans. The combination of cutting and lengthening concerns 75% of the cases. Haircuts are more common and larger in consumer loans, while shorter in mortgages and real estate secured businesses.

Of the 8.5 billion euros that were regulated, 4.7 billion euros were related to loans that went to management companies, while 3.8 billion include loans that were consolidated and returned to the banks’ balance sheets. Additional loans of € 3.5 billion can be added to the arrangements from the Bridge 1 installment grant program for households and € 2 billion from Bridge 2 for businesses. Because these loans had to be either up-to-date or first regulated by the bank, in a sustainable way, in order to join.

Today, loan management companies are responsible for a private debt of 100 billion euros and as recently stated by the president of the Union of servicers and CEO of doValue, Mr. Anastasios Panousis, “We have accepted the weight of the big problem of non-performing loans “Without the rapid crisis in our banking system. Without its rapid response, we could not return to smooth financing of the economy, strong and sustainable growth rates and a trajectory of recovery of the investment grade for Greece.”

Bank executives are calling for an institutional intervention to repay the repaid loans to their balance sheets, in order to further strengthen the trend that has been created. Due to the previous situation (“red”) which were regulated and are now serviced, they are classified, according to the supervisory rules, in a “high risk” category that requires higher provisions.

It is recalled that at the same event, at the general meeting of management companies, the Governor of the Bank of Greece, Mr. Giannis Stournaras, asked the servicers to manage as efficiently as possible the stock of NPLs (non-performing loans) they have undertaken. This presupposes full utilization of the Out-of-Court Debt Settlement Mechanism and the other provisions of the recent Law on Debt Settlement and Second Chance, the operation of the Acquisition and Re-lease body of law 4738/2020, but also an effort to speed up proceedings .

Second, they offer sustainable regulatory solutions to borrowers, or more efficient pledge management – where necessary – to make it easier for those borrowers to return to the production process. “In this context, I would like to mention that, so far, none of the management companies has applied for a license – as provided in Law 4354/2015 – that will allow the refinancing of companies. Because in several cases of viable companies, “Providing liquidity in the context of debt restructuring is essential,” he said.