Greek central bank sets out plan to reduce banks’ bad loan

ATHENS: Greece’s central bank unveiled a proposal it said could remove a mountain of bad loans from banks’ balance sheets to a single-digit ratio within two to three years, hoping to beat a deadline set by regulators.

Greek banks have the highest level of non-performing exposures (NPEs) in Europe, with more than 45 per cent classed as bad loans, the equivalent of 88.9 billion euros.

Under the central bank’s proposal, banks would transfer a “significant part” of their NPEs and deferred tax claims to a special purpose vehicle. That SPV would then convert the deferred tax claims — tax breaks to companies when reporting losses — to a claim on the state. The transfer would be financed with a bond issue, the central bank said. It did not mention the value of loans to be transferred, saying that would have to be carried out by independent third parties. Banks were expected to make a commitment of achieving a single-digit ratio of NPEs within a three-year period from engagement of the transaction. — Reuters