Officials from banks and credit servicing firms (CSFs) met on Friday to draft and send to the government a note with their positions on the latest draft of the bankruptcy code.
Noting that there has been a significant convergence in recent hours on key issues that were source of friction between the two sides in recent weeks, banks and CSFs put together a message in a bid to take advantage of the positive momentum and provide a strong push to final negotiations with Finance Ministry officials.
Meanwhile, there will be a final round of talks between the Greek government and international creditors at a technical level this week with the aim of winding up outstanding issues, as next Monday, July 6, a teleconference will be held at a senior level. Obviously, on those issues that will still be unresolved, a political solution will be sought at the highest level.
The government has accepted the basic request of banks and CSFs not to exempt debtors who meet the criteria of being financially vulnerable and have bad loans tied to a home mortgage from the compulsory execution and auction process.
Additionally, in the past week, there has been a convergence on secondary issues, such as the amount of time a borrower is relieved of debts in order to be able to resume business activities, and be considered creditworthy.
The government accepted the request from banks to give three years until final debt relief is offered, provided that the time starts from when the submission of the bankruptcy application is made and not from when the court decision is issued.
At the same time, the banks insist on an administrator being appointed on all cases in the belief that it will act as an insurance policy, while he will be able to identify any income that will be part of the bankruptcy estate.
There is also an agreement on the government’s proposal for an out-of-court settlement process for individuals, in addition to businesses. This is a proposal accepted by banks and CSFs, provided that eligibility criteria are established and the condition remains that all sides must agree on the out-of-court settlement.
Differences remain on the issue of income and property criteria, based on which a borrower is considered to be financially vulnerable and may request the purchase of his first home by the new government agency. It looks like everything will be judged by political criteria after negotiations with the country’s creditors. Banks argue that the criteria so far by which a household will be classified as being vulnerable and make use of this law as being particularly generous.
Disagreements still exist over the operation of the state body that will acquire the first homes of those going bankrupt. Here the government is asking banks to notify the state body about the debtor’s bankruptcy and the institution will then proceed with the acquisition of the property. The banks, considering that the state body will be slow-moving, want to proceed normally with the auction of the property, acquire it, and then pass it on to the state body.
The plan attempts to introduce the institution of consumer bankruptcy to Greece, through which private borrowers can, after handing over basic assets to creditors, be released with fast procedures from their debts, in order to later resume economic activity.