The Bank of Greece proposed a slate of measures to help banks offer relief to troubled household and small-business borrowers, according to guidelines published in the official government gazette.
The proposals, which aren’t binding, are designed to help banks deal with their backlog of non-performing loans. The central bank will monitor whether Greek lenders follow the plan’s best practices, which include short- and long-term steps.
Creditors and debtors won’t be able to ask the central bank to resolve disputes, the Bank of Greece said earlier this week. It developed the best-practices code after talks with consumer groups and the Hellenic Bank Association.
After six consecutive years of recession that wiped out almost a quarter of the Greek economy, banks’ bad loans have ballooned. Bank of Greece (TELL) Governor Yannis Stournaras said in June that non-performing loans reached 33.5 percent of total portfolios at the end of the first quarter, compared to 32 percent at the end of 2013.
Greece’s government will soon introduce legislation to cover a broad range of delinquent loans, a measure required as a condition of the country’s international rescue package. The Bank of Greece proposals on NPLs are designed to be tailored to help individual borrowers.
Short-term measures for helping troubled borrowers over the next five years include allowing interest-only payments, skipped payments or a grace period on late installments. Borrowers might also be able to postpone payments under some circumstances, according to the guidelines. Proposed long-term measures include extending loan terms, reducing interest rates, changing the type of interest due or the loan’s underlying collateral.