{"id":18613,"date":"2018-11-14T00:32:40","date_gmt":"2018-11-13T22:32:40","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=18613"},"modified":"2018-11-14T00:32:40","modified_gmt":"2018-11-13T22:32:40","slug":"greek-banks-inch-toward-bad-loan-relief-with-complicated-plans","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/18613","title":{"rendered":"Greek Banks Inch Toward Bad-Loan Relief With Complicated Plans"},"content":{"rendered":"
(Bloomberg) —<\/span><\/section>\n
Greek authorities are moving forward with two different plans to save their banks from a downward spiral. Some would-be investors think they\u2019re too clever by half.<\/p>\n

To reduce non-performing loans, the Greek central bank is proposing a special-purpose vehicle created with the stricken lenders\u2019 tax credits<\/a> — themselves an accounting creation of the nation\u2019s past debt restructuring. With those assets, the SPV could effectively become a \u201cbad bank,\u201d selling bonds and acquiring some 42 billion euros ($47 billion) of bad loans, according to people with knowledge of the plan.<\/p>\n

\u201cWe\u2019re developing a plan in the Bank of Greece to use the deferred tax credit or claims of banks vis-a-vis the state,\u201d Bank of Greece Governor Yannis Stournaras<\/a> said at an event in Geneva, adding that Greece urgently<\/a> needs a bad bank.<\/p>\n

\u201cIt\u2019s a highly complicated structured-finance transaction because it mixes complicated tax, legal and regulatory problems,\u201d said Jerome Legras<\/a>, head of research at Axiom Alternative Investments, a former veteran of Societe Generale SA\u2019s structured-finance team. \u201cIt\u2019s hard to see if there\u2019s a genuine chance of having investors onboard.\u201d<\/p>\n

Read More: Greece Said to Weigh Freeing Banks of $47 Billion Debts<\/a><\/p>\n

If that\u2019s not enough complexity, one of the people said European regulators could approve both this plan and a parallel one floated last month by the state-owned Hellenic Financial Stability Fund<\/a>. It envisaged an SPV partly funded by state cash and possibly involving a government guarantee. A similar plan in Italy has helped lenders offload a substantial amount of their soured debt.<\/p>\n

Tax Challenges<\/h3>\n

The news was initially greeted with enthusiasm in Greece, which needs to unshackle its banks from the bad loan burden to help revive its economy. Bank stocks surged Tuesday — albeit off a low base, as they have been sinking for months.<\/p>\n

\u201cIt is an interesting proposal,\u201d Eurobank Chief Executive Officer Fokion Karavias<\/a> told reporters Tuesday. \u201cIt would be another weapon in our armory.\u201d<\/p>\n

Piraeus Bank SA<\/a>, down more than 60 percent this year, jumped as much as 7 percent before closing 1.8 percent higher. Eurobank Ergasias SA<\/a> held its gains, closing 9 percent higher, but has still lost 28 percent in 2017.<\/p>\n

\u201cThere are still missing parts to this initiative,\u201d said Nick Koskoletos<\/a>, head of research at Eurobank Equities. Still, \u201cthe mere fact that there are additional efforts to help jump-start the balance-sheet repair process could well be celebrated by the market,\u201d he said.<\/p>\n

However, the SPV faces daunting challenges, according to Legras. The deferred tax credit-fueled entity would probably need to seek a credit rating, and then investors in bonds issued by the SPV would need to study many complex tax implications.<\/p>\n

\u2018Too Clever\u2019<\/h3>\n

\u201cI like complicated structured finance, but it seems weird to mix the two different risk profiles\u201d of the deferred tax credits and the non-performing loans in one entity, he said. \u201cMy gut feeling is it\u2019s a bit too clever.\u201d<\/p>\n

The Bank of Greece will release a detailed plan on Nov. 22, according to an official familiar with the matter. While the transfer of the tax credits<\/a> to the SPV will deplete banks of some of their capital for a short period, their ratios will bounce back once the sale of the bad loans is completed, one of the officials said.<\/p>\n

Another potential problem: It\u2019s unclear if the plan would leave the banks with a sufficient buffer of capital, according to a person with knowledge of the matter.<\/p>\n

\u201cWould I buy those bonds? I undoubtedly would not, even for a hefty new issue premium,\u201d said Timothee Pubellier<\/a>, a portfolio manager at Financiere de La Cite in Paris who invests in debt linked to financial institutions. \u201cWhat those banks need is fresh money. Moving imaginary capital will not improve their fundamental situation and won\u2019t be convincing for investors.\u201d<\/p>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

(Bloomberg) — Greek authorities are moving forward with two different plans to save their banks from a downward spiral. Some would-be investors think they\u2019re too clever by half. To reduce non-performing loans, the Greek central bank is proposing a special-purpose vehicle created with the stricken lenders\u2019 tax credits — themselves an accounting creation of the<\/p>\n","protected":false},"author":1,"featured_media":6796,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[2],"tags":[],"class_list":["post-18613","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-2"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18613","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=18613"}],"version-history":[{"count":1,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18613\/revisions"}],"predecessor-version":[{"id":18614,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18613\/revisions\/18614"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/6796"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=18613"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=18613"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=18613"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}