The extrajudicial mechanism – The reasons

By Leonidas Stergiou

The consensus button for the lifting of banking and tax secrecy is the cause of 30% of fruitless proceedings in the out-of-court phase of the new bankruptcy law. There is also a long delay in finalizing the application in order to send it to creditors for settlement. One reason is the wait in accounting offices and law firms for various outstanding issues, as well as for the accumulation of more debts to be settled.

According to the latest data from the platform of the out-of-court mechanism, more than 41,000 applications have started the process since June 1, when the new bankruptcy started. The description from the 41,000 applications, at an early stage, to the only 45 cases that have been settled (without formally being completed in all of them), is impressive.

41,000 initial applications

Out of 41,153 initial applications, 13,000 have proceeded to lift the secrecy, but do not proceed to the next phase, ie finalization, by cross-referencing data and sending the settlement request to creditors. The remaining approximately 28,000 have gone through the data collection stage (EFKA, AADE, banks, loan managers, etc.), but have not reached creditors for settlement.

Thus, in the first half of the new bankruptcy, only 517 applications (out of 41,000) have been finalized and have reached the creditors’ systems, in order for the latter to propose a settlement or reject the application. Of these 517 applications, all include debts to banks, while 158 also include debts to the State, ie to Funds and tax authorities.

Finalization for 517 and setting for 45

Of the 517 applications received by creditors, only 67 cases have been answered, of which:

– at 45 the banks and loan managers have already voted in favor, while the acceptance by the debtor and the signing of the relevant loan restructuring agreement is imminent.

– 22 applications were rejected by banks and loan managers, mainly due to the non-consent of the guarantor for declassification and consequent inability to control his assets, in order to prevent and deal with strategic defaulters.

The delays

Long delays are found in services that have not been fully digitized, such as mortgage offices and municipalities. These are procedures that, as bank executives, lawyers and accountants point out, can take up to six months or more to delay. As noted by an executive from a legal bank service in Capital.gr, with the digitization of the real estate transfer, the time for a contract was reduced to one year or a little less, compared to two years ago. This one year delay is mainly due to organizations that have not been digitized, such as local authorities and mortgage offices. It has been reported that only one TAP certificate from a municipality took more than six months. How much more there are pending cases in mortgage offices and waiting for court decisions.

Executives of the Ministry of Finance, banks and loan management companies express their optimism that the pace will accelerate as all those involved become familiar with the new bankruptcy code, while the government has taken initiatives to identify the main reasons for the delay. This was even pointed out during the last meeting of the loan management companies with the central banker Mr. Giannis Stournara, with the presence of the current special secretary for private debt management Mr. Fotis Kourmousis. There were significant delays, mainly from services that have not been digitized, but also delays by debtors in order to collect more debts to be settled before pressing the finalization button (eg waiting for ENFIA, VAT refund, income taxes, etc.). The chairman of the loan management companies and managing director of doValue, Mr. Anastasios Panousis, and Mr. Elias Plaskovitis were assigned by the Bank of Greece, the creation of a working group to improve the whole process of management and consolidation of red loans and through the new bankruptcy. For its part, the Ministry of Finance (new duties of special secretary for private debt management was taken over by Mrs. Marialena Athanasopoulou, who comes from the ESM) is expected to seek solutions to the delays due to public services.