InternationalConferenceon

Commercialpropertymarketindicesand

StrategicactionsfordistressedpropertyassetsinGreece

Athens,13March2015

Existinglegalframework

fordistressedassets

inGreece

AggelikiZERVA,BankingSupervisionDepartment

1

NPLs in Greece: High and rising levelsNPLs/loan portfolio

47,3

26,131,8

49,5

28,1

34,4

0,0

10,0

20,0

30,0

40,0

50,0

60,0

Consumer loans Mortgage loans Business loans

%

Q4 2013

Q3 2014

Source:BankofGreece 2

Asetofregulatoryinitiativesthatcouldcontributetoresolvingtheproblem:

strengtheninginstitutionalcapacityofthejudicialsystem, improvinginsolvencylegislation, bettercoordinationofoutofcourtrestructuring, developingdebtcounselingservicesandinformationcampaigns, taxincentivesforwriteoffs, developinganefficientmarketfordistressedassets, establishingreliabledataplatforms, transparencyandmodernizationofrealestatemarket, enhancingsupervision, fosteringcooperationamongpolicymakersandotherstakeholders.

Firstpolicyreaction =>Law4224/2013:GovernmentCouncilonPrivateDebtManagement 3

GDP and unemployment: critical factors for the augmentation of NPLsFactorshamperingtheresolutionofNPLs:

4

TheroleoftheBankofGreece(1)

thesupervisoryperspectivetransparent+effective negotiation(BoGsStatute, art.55A+SSMReg.)(L.4224/2013)

ExecutiveCommitteeActNo.42

onarrearsandNPLsmanagement(May2014)

CodeofConductonarrearshandling

(August2014)

stability

CRR/CRDIV

5

TheroleofBankofGreece(2)CRR/CRDIV:thebasisAsetofEUlawprovisionsalsoapplicabletoGreekbanksinfluencethewaytheinstitutionsdealwithtroubledassets:

increasedcapitalrequirementsforNPLs

reducedcapitalrequirementsforexposuressecuredbyimmovablepropertyprovidedthatspecificvaluationprinciplesarefollowed

lowerriskweightsforcoveredbonds

provisionsforsecuritization

increasedcapitalrequirementsforqualifyingholdingsoutsidethefinancialsector

leverageratio

ITSonSupervisoryreportingonforbearanceandnonperformingexposures

restructuringplans 6

TheroleofBankofGreece(3a)

ExecutiveCommitteeActNo. 42/2014:enhancedsupervisionatnationallevel.

Providingfor:AdoptionoftheEBAharmonizeddefinitionsforNPEsandForbearanceIndependentfunctionforNPEsmonitoringKPIstoevaluateefficiencyGuidelinesforportfoliosegmentation.Guidelines fordebtorsviabilityassessmentandsustainablerestructuringsolutions.Comprehensive reportingtotheboardandthesupervisor

Aimingat:Bettervaluationofcreditrisk (debtor+collateral)=>adequateprovisioningMonitoringtheefficiencyoftheconcludedrestructuringsolutions Moreoptionsforsalesandsecuritization

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TheroleofBankofGreece(3b)

CRR+ExecutiveCommitteeActNo. 42/2014

Potentialeconomiceffect

repairingcreditinstitutions balancesheetsdecreasingthecostoffundingreallocationofresourcestomorecredibleandproductivecompaniesrevitalizingrealestatemarket.

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TheroleofBankofGreece(4b)

CodeofConductonarrearshandlingCovering:

Bothnaturalandlegalpersons.

Aimingat:Onemore(andprobablythelast)chanceforsustainablerestructuringbeforeforeclosure.Motivatingmore innovativerestructuringsolutions.Establishingreliableproceduresforpropertyvaluation.Identifying(non)cooperating and(non)viableborrowers.

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howeverhowever

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NeitherExecutiveCommitteeActNo42northeCodeofConductmayimpose:solutionsforcommoncreditorswriteoffsbanonforeclosures

specificlawshavebeensettoaddresstheseissues:

L.4307/2014(knownasthelawfortheredloans)L.3869/2010(knownasKatselisLaw)L.4224/2013(knownasMoratorium)

L. 4307/2014Businessdebtsettlements(1)

Firstpillar:Taxincentivesforsettlements/writeoffsforNPLsEligibledebtors:professionals andsmallenterprises(turnover

L. 4307/2014Businessdebtsettlements(2)

ThepoolofMicroenterprisesinGreece

Source:EuropeanCommission2013SBAFactSheetGreece 13

L. 3869/2010:ahybridpersonalinsolvencylaw(1)

Covering: Naturalpersons(notfallingunderLaw4307/2014)inpermanentdifficultiesactingingoodfaith. Debtstoprivate entities.

LevelofprotectionSuspensionofallmeasuresandproceduralenforcementagainstthedebtorfromthedateofpetitionuntilthefinaljudicialjudgment.Mainresidencemaybeexcludedfromliquidationifspecificconditionsaremet.Possibledischarge ofdebts(once).

ProcedureinthreephasesDiscretionarymediationprocedure(attemptforoutofcourtsettlement).Attemptforincourtcompromise (>50%ofcreditorsagreementrequired).Judicialsettlement.

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()

L. 3869/2010(2) largebacklogofcases

Dateofpetition Dateforjudicialhearing

MagistratecourtRethymnon,Crete

30/12/2014 09/04/2030

TotalpetitionsunderLaw3869/2010

ofwhichpetitionstotheMagistratecourtofAthens

DecisionsoftheMagistratecourtofAthens

ofwhichaccepted

2010 2014 150.693 28.686 3.900 1.966Source:MagistratecourtofAthens

15Source:TEIRESIAS

L.4224/2013 (moratorium:expired31.12.2014.Tobeextended?)

Personscovered:Naturalpersonsandprofessionalsifspecificcriteriaaremet:

Annualfamilydisposableincome

HowtheCodecouldinteractwiththeotherrelevantlaws? Asamandatoryfirststageofnegotiation

Givingevidencetobeassessedbyacourton:thesituationandtheprospectsofthedebtorthedegreeofdebtors indebtednessthedebtors willingnesstocooperate

Facilitating commoncreditors solutionswhereestablishedbylaw Enhancinginstitutions discipline Fosteringcooperationculture

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RegulatoryframeworkfortransferringDistressedAssets(D.A.)

ThevendorssideThebuyers

side

18

afterpriorapprovaloftheBoG

AfterpriornotificationtotheSSM

Nosupervision

WhocanbuyNPLs?

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PotentialnextstepsRegulatoryframeworkfornonbankfinancialinstitutions:

theproperlevel oftheregulation/supervision (focusingratheronmacrothanmicrorisks),

thenecessarylevelofconsumerprotection(information/behaviorpractices,fairtreatment/confidentiality).

AprivateorapublicAssetManagementCompany(AMC)?

Acentral orseveralSpecializedVehicles(securitization/servicing/restructuringofparticularportfolios)?

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AregulatoryframeworkforAMCKeyissues

Objectives/PotentialinteractionwithBankingRecoveryandResolutionDirectiveStatusofownershipoftheAMC=>risk sharingGovernance/strategySizeEligibilityofassetstobetransferredValuationofeligibleassetsConditionality(stateaidruling)Duration(welldefinedexitstrategies)Servicing/financingCompetitionEligibilityofAMCs bondsascollateralformonetarypolisy

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:

Isitenough?

Prioritization and speeding up othercomplementaryactions.

Fostering coordination among authoritiesandinstitutionsinvolved.

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ComingsoonEBAGLs:harmonizedpracticesinhandlingarrearsNewIFRS9:achievingmoreprudentandtimelyprovisioningbyexpectedlossmodel

Shadowbanking:aseriesofproposalsMortgageCreditDirective:valuationofresidentialimmovableproperty

EUgreenpaperforasinglecapitalunion:thoughtsforharmonizinginsolvencylaws

Securitization/SMEs: seekingalternativechannelsforfundingwhileensuringsoundriskassessmentanddiminishingconflictsofdifferentplayers

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Thankyouforyourattention!

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