Following the Commission’s proposals that came to light last week, it seems that the debate about the creation of a bad bank in Greece begins. However, the whole process is not expected to be completed immediately, as the predominant view at the ECB is that Greek banks will have to reduce “red” loans by their own means.
At the recent general meeting of the Bank of Greece, its governor has reportedly left open the possibility of creating one or more Asset Management Companies’ headquarters (AMCs). However, he called for banks not to be complacent as they must achieve the targets already agreed with the SSM (the ECB’s supervisory arm) on the reduction of “red” loans by 2019.
Apparently, this is shared by other executives of the Bank of Greece, too, who expect the stress test process to be completed first and the true image of systemic credit institutions to show how to create a Greek Bad Bank, but also what market segment it should be concerned with.
The EU plan to set up national AMCs that will buy a package of “red” loans from banks in order to manage it clarifies their operation so there is no risk of being considered state aid that would cause the so-called bail in, or to enhance the liquidity of banks by shareholders, bondholders and depositors.
With regard to the Greek banking system, it seems that the idea of the bad bank idea prevails, but -for now- there are no formal and institutional positions on the issue.
On the part of the government, the matter is being thoroughly investigated within the framework of the development plan which should be designed and submitted to the Eurogroup on April 27. It is expected to cover the post-third programme period…. / IBNA