By E. Sakellari
Greek banks' leaderships are reportedly looking at an "Irish solution" to reduce the massive amount of non-performing loans (NPLs) burdening their credit institutions' balance sheets, according to international analysts.
The "split mortgage" method has reportedly been proposed in the past by Greek bankers, who saw the option more-or-less successfully implemented in property balloon-burst Ireland in previous years.
Essentially, a borrower in arrears would have their loan split into two parts: one that is serviceable and the other that remains in distress and will eventually be written off (and not "warehoused").
Implementing such a model would require two main parameters:
- In case the borrower fails to service the first portion, then the second part would resurface as an arrear.
- The first portion would have to be paid in full in order to permanently eliminate the "bad loan" portion.