By A. Doga
Greece’s four systemic banks are expected to point to “macro-economic errors” and uncertainty, in tandem with a deficient institutional framework, as the primary reasons for failure to meet targets for reducing the “Olympus-sized” mountain of debt entailed in non-performing loans (NPLs) in the country.
The development comes ahead of expected recommendations by Danièle Nouy, the chairwoman of the European Central Bank’s (ECB) supervisory board and the unofficial head of the latter’s Single Supervisory Mechanism (SSM).
Nevertheless, the most recent reports ahead of Nouy’s visit to Athens on Tuesday and Wednesday refer to a SSM leadership that is well-briefed and cognizant of the situation in Greece’s credit and banking sector, with banking analysts saying a “yellow card” will be shown to the leftist Greek government instead of the banks.
Greece’s crisis-battered and still capital control-plagued banking sector, along with European creditors, have long pressed for legal revisions in the framework to better manage NPLs and non-performing exposures (NPEs).
Nouy’s visit comes within the SSM’s chief continuous meeting with the leaderships of individual central banks in Euro zone countries, as well as with banking groups in EZ countries.
Nevertheless, in Greece her contacts acquire an even greater significance due to the standing problems affecting the sector, and by extension, the still bailout-dependent Greek state budget.
As such, reducing NPLs and NPEs in Greece is of paramount importance to Euro zone authorities.
On their part, banking officials in Greece insist that targets for reducing NPLs can “stand up” until April and the hoped for conclusion of the second review of the Greek program (third bailout). However, the same officials warned that an increase, by 1.7 billion euros, over the beginning of the year in new “bad debt”, when combined with an outflow of bank deposits by 2.5 billion euros, should sound “alarm bells” for all sides involved.
