Bank of Greece to appoint Rothchild, Boston Consulting, and Deloitte on bad bank.

Update

Bank of Greece (BoG) governor Yiannis Stournaras is pushing ahead plans to set up a bad bank as the procedures to select consultants for it are expected to be completed in the next few days.

According to sources, the BoG is running three different tenders in order to appoint specialized consultants.  People familiar with the matter said to NPL Confidential that the Bank of Greece is about to appoint  Rothchild,  an investment bank that will be responsible for the structure of the bad bank, an Boston Consulting Group that will operate as organizing advisor appointed the task of taking in the problem portfolios and Delloitte who will oversee the tax and accounting issues of the tool being developed.

 

Sources told NPL Confidential that discussions are at an advanced stage and the BoG may announce the three advisors by the end of this week, while Stournaras may unveil some details on the way the bad bank may work.

BoG officials point out that in the last two months the first draft has already been sent to the Finance Ministry and the ECB’s supervisory arm, the SSM, which is being informed of every step being taken, while the central bank governor has extensively presented the plan to the prime minister’s office.

The BoG’s next goal is to get approval from the supervisor and the EU, so that the tool can be made available to banks in 2021. In this context, the Greek central bank governor will submit the final plan on the national bad bank to the SSM in the fall and commence talks with the General Directorate of Competition of the Commission (DG COMP) for the necessary approvals by the end of the year. Once the green light is given by the European Commission, the new mechanism can be used by Greek banks, on a voluntary basis, at some point in 2021.

While the BoG is moving ahead with preparations, Deputy Finance Minister Giorgos Zavvos told parliament last week that the issue does not need to be addressed now as there are two major problems that make it impossible to create.

The first thing that should be examined is whether there can be a bad bank, either at a European or national level, said the deputy minister. If we are talking about a European bad bank, it would have to bear a burden of 500-600 billion euros of bad loans and this cost would be borne by European funds – a decision that the EU could not make.

The second option is to create a national bad bank, at a cost of some 10 billion euros that will be paid for by the Greek taxpayer, he added.

On the contrary, the deputy minister stressed that the Hercules bad loan scheme transfers the cost of the project to the investor and not to the Greek taxpayer. This is the huge difference between Hercules and everything else, Zavvos noted.

The second element that does not bode well for the creation of a national bad bank is, as the deputy minister analyzed, the supervisory cost, that is, the capital must be consumed by lenders to achieve this.