The Single Supervisory Mechanism (SSM) for European banks has urged Athens to take bold steps to resolve non-performing housing loans, including a generous write-down if necessary.
Though there has been progress in dealing with non-performing loans (NPLs), the SSM has urged that banks expedite the process, so as to resolve as many cases as possible within the next two years, making smart use of their projections and of their capital.
The key to a successful restructuring of NPLs, according to the SSM, is the percentage of the loan that the bank thinks it can recoup, based on the borrower’s financial situation.
Sources say that the SSM has shown understanding of the social dimension of home seizures, and does not want banks to become real estate managers.
It is in that context that the SSM accepts haircuts on home loans. The higher the debt level in relation the borrower’s income, the larger the write-down.
If the debt after reaching an arrangement with the bank is serviced on schedule, then there will be a gradual haircut.
The aim is to lure borrowers who have money and yet do not service their loans to make an arrangement with the banks.