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Greece's Hercules bad loans plan at serious risk

Απαγορεύεται από το δίκαιο της Πνευμ. Ιδιοκτησίας η καθ΄οιονδήποτε τρόπο παράνομη χρήση/ιδιοποίηση του παρόντος, με βαρύτατες αστικές και ποινικές κυρώσεις για τον παραβάτη.
Greek banks are closely watching developments regarding the plan that has been prepared by Deputy Finance Minister George Zavvos. It is seen getting the green light from the European Commission but will not be able to be implemented due to many technical difficulties.

Greece's Hercules plan, a proposal aimed at helping the country's banks get rid of bad loans, has not been approved yet by the European Central Bank's Single Supervisory Mechanism (SSM), in a move that puts the scheme at serious risk, sources tell Business Daily.

At the same time, Greek banks are closely watching developments regarding the plan that has been prepared by Deputy Finance Minister George Zavvos. It is seen getting the green light from the European Commission but will not be able to be implemented due to many technical difficulties.

According to officials close to the matter, Zavvos has failed to respond to a series of issues raised by the SSM, and Bank of Greece, and has also refused to provide any information on tens of technical issues raised by banks, raising compatibility concerns about the scheme.

Well informed sources have indicated that after many failed attempts to communicate with Zavvos on the plan, banks informed Finance Minister Christos Staikouras and Bank of Greece governor Yannis Stournaras over the weekend, warning them of the risk of the plan turning into a fiasco due to the inability of lenders to take part in the scheme.

This development could trigger a fresh period of uncertainty for Greece's banks.

In the dark

It appears that the deputy finance minister has had some discussions with the EU's DG Comp in order to sidestep concerns on state aid being provided, however he has not been in contact with the SSM on crucial technical issues and possible regulatory problems.

Banks, whose participation in the plan will determine its success or failure, have also been kept in the dark. As a result, they cannot determine whether they will participate in the proposal which aims to reduce 30 billion euros of NPEs from the Greek banking system.

"The management of banks have absolutely no idea of the parameters of the Hercules plan, and whatever has been agreed upon between Zavvos and DG Comp has been done so without all the parties involved," a senior official tells Business Daily.

Another bank official says that in the many meetings held with Zavvos, not one page of the Hercules plan and how it will be implemented had been provided, with talks in the meetings being limited to the deputy minister addressing participants in a "patronizing manner."

The success of the plan will not be dependent on whether it is approved by DG Comp but on whether the banks will be able to make use of it.

In 2020, lenders will face another round of stress tests and it is crucial that they have reduced bad loans by as much as possible by the end of this year. The rally seen in banks stocks, which have gained 80 percent in the last year, is largely reliant on expectations that they will be able to offload large amounts of bad loans.

The cost to banks and the economy will be large if the Hercules plan fails, with the time frame for corrective steps on the proposals being very limited.

YIANNIS PAPADOGIANNIS

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