Finance Minister in teleconference with banks, loan servicers on bankruptcy code

Banks and loan servicers expressed their concerns in a meeting with Finance Minister Christos Staikouras yesterday that the country’s new bankruptcy code being put together, which is being discussed with international creditors, will provide a new generation of strategic defaulters with room to renege on their obligations.

During a teleconference, representatives of lenders and the EEDADP (Hellenic Loan Servicers Association of Greece)  presented to the minister a series of concerns regarding the new bankruptcy law, as they consider that some of the articles originally formulated could provide a shelter and a driving force for a new generation of strategic defaulters.

According to sources, the two main objections have to do with the level of protection offered on primary residence and the length of time that one can be considered bankrupt until he can resume business activities.

One of the main criteria a debtor must meet to protect his first home is for the objective tax value to be up to 200,000 euros if a borrower is single, and this amount increases by 40,000 euros when the debtor is married and by an additional 20,000 euros for each child.

As the CEO of a loan management company explains to NPL Confidential, the criteria that foresee a borrower married with three children being able to protect a home with an objective tax value of 300,000 euros is very high and can even shield villas from debt.

At the same time, the provision that allows individuals who declare bankruptcy to be able to resume business activities after two years, also creates the wrong incentives for those who can hide assets and after a relatively short time can get back to their businesses and access hidden assets.

The minister listened to the concerns raised and the two sides agreed to comb through the bill under discussion in the coming days and to record all ambiguities that strategic defaulters could take advantage of.

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