Φωτο: Shutterstock

Banks send note outlining concerns on new bankruptcy code

The banks' views are expected to be supported by a special study, which will show the potential impact and the risk of creating new wave of bad debt from the new bankruptcy code.

The Hellenic Banking Association will deliver a detailed note to the Finance Ministry today outlining its positions and concerns on the new bankruptcy framework being developed, sources told Business Daily.

The note will reflect the concerns of banks about the new debt settlement framework and warn of the risk of complications and problems arising if there are no amendments to the law. The banks' views are expected to be supported by a special study conducted by Deloitte, which will show the potential impact on banks and the risk of creating new wave of bad debt from the new bankruptcy code. The impact analysis will be delivered to lenders on Friday and will reflect the effects of the changes in the banking system as well as alternative scenarios, if changes are made in line with what the banks are proposing.

Although lenders, and especially their executives, avoid criticizing the government, it is clear that there is a big distance separating the two sides and there has been no productive cooperation on issues critical to the functioning of the banking system, such as the bankruptcy code. At the same time, government officials said in a recent briefing that there was no difference of opinion or disagreement between the two sides, which does not seem to be the case. Business Daily has reported in detail on the difference between the views of the government - banks on the bankruptcy law.

The objections focus on the out-of-court procedure, the operation of the platform and the real estate management body that will be created (acquiring real estate from vulnerable borrowers), the response of courts to the new law, etc.

National Bank CEO: New framework complicated, risk of distortions

National Bank CEO Paul Mylonas, speaking yesterday at the Economist conference, criticized the new framework, emphasizing that it is complex.

"I want to emphasize", noted Mylonas, "that the laws must be easily implemented and be within the possibilities of public administration, and especially of the judicial system". He stressed that this bill is complex because it combines out-of-court settlements, bankruptcy proceedings for both households and businesses and social policy.

"It requires the creation of complex state infrastructures, including a platform and an algorithm for determining restructuring, while at the same time it depends on the efficiency of the courts. I believe that many of these issues can be resolved and our cooperation with authorities on this issue has proved to be very constructive. But experience has taught us that a law that takes time to implement is likely to distort debtor behavior," he added.

Comments from Prime Minister Kyriakos Mitsotakis over the weekend, stressing that there will be no first home auctions until the end of 2020, without clarifying whether vulnerable households will be separated from strategic defaulters, is raising concerns among bank officials.

Last week the Hellenic Banking Association, in the context of actions to help borrowers hit from the pandemic, announced that banks will consider requests to suspend auctions concerning the first home, until 31.12.2020, in regards to vulnerable borrowers.

YIANNIS PAPADOGIANNIS

RELATED ARTICLES

ENGLISH EDITION

The August rally for bank stocks and the tough day after 

The banking sector, due to concerns about the long-term effects of the crisis on the quality of their portfolios, has come under stronger pressure in Europe and the US. In Europe, the banking index has fallen since the beginning of the year by about 27% against a fall of 12% of the pan-European Euroxx 600 index, while in the US the banking sector has fallen by 20% versus a rise of 5.2% in the S&P 500.