The arrangements for the extension of the program “Heracles” aimed at further reducing Non-Performing Loans in the banks’ portfolios are included in the bill “Loans: Transparency, competition, protection of the vulnerable – Incorporation of Directive (EU) 2021/2167” which was submitted to the Parliament today.

The bill also introduces a series of important measures by which:

  1. Obligations of transparency, information and respect for debtors’ rights are established for servicers.
  2. The out-of-court mechanism is modernized and protection for truly vulnerable debtors is extended.
  3. The operating framework of the Real Estate Acquisition and Leasing Agency is being improved.
  4. Regulations are introduced that enhance competition, such as the granting of loans by non-banks.
  5. Bankruptcy Code procedures are simplified
  6. Transactions through direct payment systems (IRIS) are being expanded.

The Minister of National Economy and Finance Kostis Hatzidakis he said: “Our intervention on banks and loans combines the objective of financial consolidation with the protection of truly vulnerable debtors, with a range of modern and fair solutions. Servicers acquire new, strict transparency obligations, to better inform borrowers. The extrajudicial mechanism is simplified and improved, with special care for the vulnerable. The expansion of the Hercules program will work to the benefit of the robustness of the banking system. While at the same time competition in the banking system is promoted with specific initiatives, such as the possibility of non-banking institutions to give housing and business loans, which is already done in several countries abroad. The Greek economy has proven to be resilient and will climb even higher in 2024! The further treatment of overdue private debt will certainly contribute in this direction!”.
The arrangements for Heracles, following a relevant agreement reached with the European Commission, provide for the introduction of the third phase of the program which will have a maximum guarantee limit of up to 2 billion euros and a duration until 31.12.2024, in order to consider requests to be submitted by Greek banks.

Through “Hercules”, the State provides a state guarantee in senior bonds of securitized loans, for a fee. Since the start of the program, in 2019 the State has granted guarantees totaling 18.7 billion. euros, which decisively contributed to the reduction of the stock of Non-Performing Loans in banks, from 40.6% in December 2019 to 8.6% in June 2023.

Hercules III will have the same terms and conditions as the initial phases of the program, but the minimum senior bond credit rating is now set at BB+, taking into account the country’s recent credit upgrades.

The re-introduction of the program is expected to contribute to the reduction of Non-Performing Loans, reducing borrowing costs for Greek banks and freeing up funds for loans to businesses and consumers. In addition, it is expected to further improve the credit rating of Greek banks and make them more attractive to international investors.
The bill also includes a series of regulations for transparency in debt management, protection of vulnerable borrowers and strengthening of competition in the banking system.

Particularly:

  1. Servicers: A series of specific obligations are introduced for servicers to inform, serve and respect the rights of consumers, based on the provisions of Community Directive 2021/2167 but also beyond them. Among other things, the servicers are obliged to provide through a special digital platform personalized and detailed information to the debtors, about the amount of the debt, the history of payments, installments, the interest rate of the arrangement, etc. The debtor will be able to see these details by logging in using his password in a special application on the servicers’ websites (by analogy with the banks’ web banking). This application should be put into operation by March 31, 2024 at the latest. Penalties for violators include fines of up to 500,000 euros, an obligation to correct the violation, up to and including revocation of the operating license
  2. Out-of-court: The proposal to restructure the debt of vulnerable debtors as it results from the application of the out-of-court algorithm will be automatically and mandatorily accepted by all creditors (banks and the State). The debtor reserves the right to reject this proposal, while creditors can challenge it in court if they have evidence that parameters of the application are not true. Along with a ministerial decision that will be issued immediately after the passing of the bill, the algorithm is being improved for all debtors who have loans with collateral and not just the vulnerable. In particular, the amount of regulated debt from collateralized loans will be reduced by up to 28% compared to the current situation. With the same decision, the interest rate of the arrangements will be set at 3% fixed for 3 years.
  3. Real Estate Acquisition and Leasing Agency. Amendments are introduced that aim to relieve vulnerable debtors when repurchasing the property and to attract the interest of investors in order to proceed with the formation and operation of the body. Specifically, the debtor’s obligation to pay the 12 years’ rent is lifted in the event that he exercises the right of repurchase earlier, the Agency’s tax status is equated with that of companies that invest in and manage properties that generate income and it is foreseen that the Agency will acquire the properties with a 30% discount on the commercial value of the property or the first offer price. The debtor will also be able to benefit from this discount in the future when exercising the right of repurchase.
  4. Loans from non-banking entities. In addition to loans to natural persons to meet consumer and personal needs, Credit Companies are also allowed to grant housing loans. The aim is to stimulate competition in the provision of credit, to facilitate access to finance for natural and legal persons excluded from the banking system and to facilitate the refinancing of loans.
  5. Bankruptcy Code: simplified regulations aimed at speeding up procedures. It is stipulated, among other things, that the financial details of the debtor will be sought