Creditors scan over Hercules scheme

Ministry of Finance Athens Greece
The Finance Ministry has informed Greece’s official sector creditors on how the Hercules bad loan scheme has been performing and its impact on reducing bad loans in the domestic credit system.
Sources told NPL Confidential that the ministry informed creditors the Hellenic APS has begun to bear fruit as approvals for the transfer of all three of Eurobank’s securitisations to Hercules have already been given. At the same time, creditors were informed that the other three systemic banks have officially announced their strategic planning to participate with their securitizations in the Greek APS. Alpha Bank will start with the Galaxy project worth 10.5 billion euros, followed by securitizations from Piraeus Bank and the National Bank.
Piraeus Bank will precede National Bank, proceeding with two securitizations, totaling 7 billion euros. These are the Vega securitization, 5 billion euros, for which the bank recently selected JP Morgan as adviser and the Phoenix securitization, 2 billion euros, in which UBS was appointed as adviser.

National Bank will turn to the Hercules plan faster than originally planned as it has already started approaching investors for the Frontier securitization, non-performing loans over 6 billion euros, for the beginning of the second half of 2020.

Hercules 2-Ready as soon as needed
Meanwhile, the government informed creditors that it is ready to proceed as soon as necessary with Hercules 2, in order to help banks meet the target of reducing bad loans this year by 30 billion euros.

According to sources, the Finance Ministry pointed out to creditors that the government will closely monitor demand from banks for Hercules and will be able to proceed with Hercules 2, extending the duration of the program and going beyond 12 billion euros, the state guarantees that can be used by banks.

Creditors have been closely watching the course of the Hellenic Asset Protection Scheme in recent months as its effective operation is considered crucial due to the pandemic. Greek lenders are under pressure to speed up plans to reduce non-performing loans of 60.9 billion euros as the recession due to the pandemic is expected to create new non-performing loans, which banks estimate to be at around 7- 10 billion euros.
At the same time, the SSM is expected to present in the coming days the vulnerability test it conducted on European systemic banks, including Greece’s, reflecting the impact of the coronavirus crisis on the financial system.

As part of the test, SSM had asked Greek banks to constantly inform them about the progress of their loans, both in terms of the flow of installments, and in terms of borrower demand to join payment loan suspension programs.

For their part, banks implemented macro-scenarios on the expected recession and increased their provisions.

It is noted that bank estimates for the new wave of bad loans triggered by the coronavirus crisis is for an amount of 7-10 billion euros. A better picture will appear in the first quarter of 2021, when both the loan moratoriums banks have entered with businesses and households will have expired, as well as the subsidy of mortgage installments for borrowers affected by the pandemic crisis.

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