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Banks’ plan for loans: Subsidy to at least 30,000 vulnerable borrowers – The criteria

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The four systemic banks announced the plan they presented to Finance Minister Christos Staikouras – The banks’ plan in detail

In announcements about the subsidy plan for vulnerable borrowers, the four systemic banks made public, presenting the proposals they submitted to Finance Minister Christos Staikouras.

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In their joint statement they state:

“The four systemic banks participate in a constructive spirit in the institutional dialogue with the Ministry of Finance.

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During yesterday’s (14/12) meeting of their administrations with the Minister of Finance, Mr. Christos Staikouras, each Bank presented, based on its own approach, data, positions and proposals on a series of issues related to the operation of the financial system, the its response to the need to finance the growing economy and to support households and businesses in the current situation.

– She presented, individually, the results of her credit policy and her contribution to the strong growth rates recorded by the Greek economy this year. The net credit expansion in Greece to businesses for the first ten months of 2022 reached €4.5 billion (10.8% on an annual basis) and by the end of the year it is expected to approach or even exceed €7 billion.

Furthermore, within the context of the Recovery and Resilience Fund (RDF), banks have assessed and submitted on behalf of their clients total investments of approximately €10 billion, of which up to 40% will be financed by credit institutions. These investments cover almost all sectors of the Greek economy and are expected to create tens of thousands of jobs in the coming years. Also, the banking system has an active role in attracting foreign direct investment to Greece, which in 2021 reached €5.5 billion (3% of GDP), a historic high which is expected to be exceeded this year.

– A corporate social responsibility plan was presented to the Minister of Finance to subsidize the installments of the loans that vulnerable households have received in the past, in order to limit the burden on servicing their loan obligations from the rise in ECB interest rates.

The development of the vulnerable tranche subsidy scheme took into account the current supervisory framework and was reviewed by the European Supervisory Authority (SSM). The specific terms and specifications are described in detail in the attached appendix. The scheme of the subsidy includes all existing loans of vulnerable borrowers, regardless of the bank of origin of the loan, systemic or not, whether it remains on the bank’s balance sheet or has been transferred to third parties.

Based on the above parameters, it is estimated that at least 30,000 borrowers are eligible for subsidies, for loans of at least €2 billion. The total cost of the program will be jointly and equally borne by the four systemic banks, within the framework of corporate social responsibility programs , which is developed separately by each bank.

In the meeting with the Minister of Finance, the following were also discussed:

• Matters concerning the extrajudicial mechanism of Law 4738/2020. The banks underlined their support for the out-of-court private debt settlement mechanism, which, alongside bilateral debt settlements, is an important tool for private debt management. In the context of the cooperation with EGDICH, a reduction in the interest rates of the relevant algorithm settings has already been examined with the Special Secretariat, while additional improvement proposals are also being examined and are expected to be finalized at the beginning of next year. The goal is to significantly increase the approval rate for borrowers who apply for debt settlement through the out-of-court mechanism, including those who are aware that they have suffered a reduction in their incomes. The last months have already seen an increase in approval, a trend that is expected to continue. The reduction of non-performing loans to a single-digit percentage is a success overall for the Greek economy, paving the way for the country’s return to investment status.

• The course of interest rates, as determined by the ECB, and the effect of monetary policy on deposit rates. The Greek banking system ensures the savings of citizens and the development perspective of the country’s businesses. This was also confirmed during the previous three years, with deposit interest rates remaining in positive territory, at a time when the average interest rates on term deposits in the euro area were at negative levels, fluctuating around -30 bp. As a result, time deposits in Greece yielded significantly higher returns than in the Eurozone, a development that brought an interest rate benefit for Greek businesses approaching or exceeding €300 million. In yesterday’s meeting with the Minister of Finance, each bank separately and based on its commercial strategy committed to constantly review its interest rate policy, as a result of which the process of covering the deviation recorded in the last two months, as a result of the greater speed of adjustment of European banks, has begun from the negative interest rates of previous years. Greek depositors are already offered a series of options that combine security and returns. For example, term deposits of 12 months or more have annual returns, depending on the bank and depending on the amount, that reach or exceed 0.80%. Each bank, separately and independently, will continue to adjust its deposit rates, taking into account the relevant decisions of the ECB, its internal policies and wider money market conditions.

• Fee issues for various simple banking transactions. Each bank individually and based on its commercial policy plans and reviews a series of commissions provided for the provision of banking services in accordance with current European legislation. In this section it is pointed out that for incoming and outgoing remittances, the DIAS company – a national clearinghouse for interbank payments, in which the four systemic banks are shareholders – has developed a series of electronic services that are provided to customers, businesses and individuals, free of charge. For example, through the already existing IRIS payments service, it is possible to transfer money for free from anyone to anyone, natural or legal person, up to the amount of €500 per day, in real time via mobile banking, without requiring an account number other than a mobile phone – and this in the guaranteed secure payment environment, according to the European SEPA Instant Credit Transfer scheme.

• Each bank, depending on its commercial policy, carries out targeted commercial actions throughout the year (reward programs for its customers for transactions through debit and credit cards), in cooperation with the retail trade. It is estimated that the domestic banking system will spend an increased amount in 2022, around €50 million, to finance the specific programs, an amount that is channeled directly to cardholders and ends up in Greek businesses, contributing to the increase in their turnover.

• Finally, we must not forget the most important contribution of banks in matters of Corporate Social Responsibility, as through sponsorship programs they support institutions and organizations in the sectors of health, society, education, forest firefighting, culture, with amounts that in the last 4 years have reached €60 million.

The banks plan

Plan to support vulnerable borrowers within the social responsibility programs of each banking institution

Beneficiaries: Borrowers with a home loan or small business loan, secured by collateral on the 1st residence.
Income criteria, as defined in Law 4472/2017 for inclusion in vulnerable status, namely:
annual income up to 7,000 euros, increased by 3,500 euros, per family member, with a limit and maximum annual income of 21,000 euros
maximum value of main (first) residence 180,000 euros (based on ENFIA calculation value)
and

total deposits up to 7,000 euros, increased by 3,500 euros for each family member with a total deposit limit of 21,000 euros.
Subordinated debts: The existing informed debts, i.e. loans in arrears up to 90 days, with a reference point (for the informed or not) the date of submission of the request by the creditor. Debts arising from new loans granted after today’s date are not eligible.

Subsidy rate: 50% of the interest rate increase (with increase calculation date of 30.6.2022). The subsidy will be stopped if the debtor becomes delinquent in servicing his installment for a period of time longer than 30 days.

Subsidy scheme: Creation of a corporate social responsibility fund, with equal contributions from the 4 systemic banks, which will however be managed by a third party (EGDIX) through the GEFYRA platform, to which the beneficiary’s application will also be submitted.

Grant duration: 12 months.

The application deadline will be set and announced.

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