Chrysostomos Tsoufis

Within the week – maybe even today – banks will announce details of their rate hike shield plan that they will raise for all mortgages, essentially converting them from floating to fixed, with the imposed ceiling on the three-month euribor interest rate.

This shield will work in addition to the subsidy of 50% of the increases in the mortgage installments of those who are considered – now based on the expanded income criteria – vulnerable which is already running.

With these 2 arrangements, both the government and the banks want the course of reducing bad loans not to be reversed and to create a new generation, a possibility that is one of the six major risks for the Greek economy according to the Governor of the Bank of Greece , Giannis Stournaras.

The figures of the annual report of the Bank of Greece show that 2022 finally left us with a single-digit percentage of non-performing loans at 8.7% from 12.8% in 2021 and amounting to €13.2 billion.

To be precise, in the 4 systemic banks it is at 6.4%, but the smaller non-systemic ones raise the average as they do not reduce the bad loans from their portfolio at the same speed and the Central Bank points out that the reserve in some of them remains very high.

However, it remains at a much higher level, about 3 times above the European average.

We must not forget that a multiple number of red loans are in the hands of the so-called funds, around €70 billion, but qualitative data on the specific portfolios do not exist.

As expected, consumer loans “redden” more easily, almost 2/10 (18%) are in arrears. 10% is the corresponding percentage in housing and 7.6% in business.

Of the red business grants, 27% have been given to freelancers and very small businesses, followed by small and medium-sized businesses with 11.7%.

Of the red bank loans, 30.6% are considered uncollectible and 36.2% have been cancelled.

1/4 of bad loans are in arrears for more than a year and this is extremely worrying since their percentage has increased by 4 points compared to last year.

Of the total red loans, at the end of the year 36.1% were connected to some regulation, while the Central Bank points out that a large rate of loans that are regulated quickly turn into the red.

On the other side the recovery rate is only 4% although increased considerably compared to last year.

In this light, it is no coincidence that Christos Staikouras’ constant exhortations to banks and especially funds to do everything they can to offer sustainable loan arrangements even when already arranged loans are being considered.

What they see in the Treasury is of course the increase in borrowing costs. According to the BoE report, the average interest rate for a business loan in 2022 was 3.5% from 3% in 2021.

In January it had already reached 5% and of course it continued to rise.

The picture with housing loans is similar. Average 2022 3.1% from 2.8% in 2021. In January it had already climbed to 3.7%.

And of course everyone recognizes that the cycle of interest rate increases may be closing, but we are still far away as long as inflation remains.