Loan costs: What the Spanish model predicts – What Staikouras and bankers discussed

By Chrysostomos Tsoufis

In the debate on the reduction of borrowers’ burdens due to the continuous increases in interest rates, the finance ministry and banks agreed to put the Spanish model on the table for discussion, that is, the recent relief measures announced by the Spanish government for 1 million consistent borrowers. The banks they will undertake to “run” the measures after adapting them to the Greek reality (which means lower income criteria than the Spanish ones) and will inform about the results of the “exercise” in a new meeting they will have in about 7-10 days with the Minister Finance. The big concern of the banks is that the Spanish model does not lead them to write more provisions.

The Spanish model considers as the most vulnerable households those with an annual income lower than €25,200. For these it is provided:

-Lower interest rates during a five-year grace period, while they are also allowed to carry out a second debt restructuring.
– Access to a two-year grace period, with a more favorable interest rate during this period and an extension of up to seven years of the loan term.

For households of the so-called middle class with an income below €29,400 per year, the freezing of payments for 12 months and a seven-year extension of the duration of the loan are allowed.

The Spanish they also zero out the cost of early repayment of the loan, but also of converting it from a variable to a fixed interest rate.

According to information from skai.gr, the banks are also pushing for interventions from the government that will have to do with subsidizing interest rates or installments according to the standards of the program BRIDGE, but the response of the Ministry of Finance is that there is currently no fiscal space. The measures may concern consistent borrowers, but it is of particular interest that the Ministry of Finance mentions in parapolitika that something must be done for those who are among the defaulters and those who are consistent, that is, those who can no longer service their loans.

In the discussion with the bankers, Christos Staikouras mentioned problems in various sectors and asked the banks to take immediate action. The Ministry of Finance requested:

-Greater flexibility in the granting of loans so that there is a faster credit expansion but also containment of interest costs in the new loans that will be granted.
-Greater flexibility in bilateral arrangements but also speeding up the utilization of the provisions of the extrajudicial mechanism so that there is no wave of increase in bad loans.
-Reducing the cost of all kinds of supplies
– Passage of interest rate increases on deposits. According to the latest data from the Central Bank of Greece for September, the difference between lending and deposit rates is chaotic. The average interest rate for new deposits in Greece is just 0.04%, while for new loans it is 4.6%.

According to information from skai.gr, the banks are expected to raise interest rates on deposits in the next period.

In any case, as a high-ranking official of the Ministry of Finance pointed out, the next period will not be a “walk on the beach”.

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