By €25 billion, “red” loans to banks and servicers were reduced in the third quarter of last year compared to 2019, from €92 billion to €67 billion.

These figures have been recorded at the Ministry of National Economy and Finance, whose officials say this significant reduction in private debt is one of the reasons for the upgrades of the Greek economy by rating agencies.

According to the ministry’s agents, a series of legislative initiatives (Law 5072/2023 and Law 5113/2024) that significantly improved the functioning of the out-of-court mechanism contributed to the reduction of “red” loans. To date, the total number of successful settlements stands at 30,515, with the total value of settled debts amounting to €10.01 billion. And it is noteworthy that regulations in the out-of-court mechanism increased by 81% between 2023 and 2024. While, the new initiatives announced by the Minister of National Economy and Finance Costis Hatzidakis (e.g. doubling the income and property criteria threshold in the mandatory out-of-court mechanism) greatly expand the scope of the out-of-court mechanism and the level of protection for tens of thousands of debtors.

The relevant officials of the Ministry of Finance give an indication of what has been in force to date:

– Automatic and compulsory acceptance by banks and the State of the debt restructuring proposal of vulnerable debtors.

– Inclusion of persons with a disability rate of more than 67% in the category of vulnerable debtors with increased limits on income and asset criteria.

– Inclusion of the following criteria in the list of criteria for the inclusion in the tax-benefit category of the tax-benefit category.

– Adding a higher “haircut” of 28% to the debt.

– In particular, with the presumed consent of creditors to the out-of-court application of the vulnerable, the protection of vulnerable borrowers has been enhanced, with 2,673 vulnerable households benefiting from debt adjustments.

– Fixed interest rate of 3% for 3 years for all arrangements (government, banks, servicers).

– Ability to settle the debts to the State of legal entities which have been dissolved or liquidated, by the persons co-responsible for the debts.

– Ability to make an advance payment of up to 10% for debtors who have been notified of an auction program, with the exception of vulnerable debtors for whom a vulnerable debtor certificate has been issued (where no advance payment can be requested).

– Ability to reinstate debts to include debts to the State that were established in the interim period if the granting of a restructuring proposal is delayed for any reason.

It should also be noted that through the Heracles program, banks have achieved a remarkable reduction of non-performing loans in their portfolios. In the third quarter of 2024, the rate reached 4.6% (in 2019 the rate was 40.6%).

At the same time, it is recalled that the new measures announced by the minister are as follows;

1) Increasing the income and asset thresholds in order to qualify a debtor as eligible under the mandatory acceptance of the out-of-court mechanism by creditors. Under the introduced regulation, the criteria for designating a borrower as eligible are doubled in order to make the consent of all creditors mandatory for the debtor to join the out-of-court mechanism. The doubling of these thresholds is subject to the condition that the debtor has a maximum limit of already non-performing bank debts (i.e. to banks or servicers) of EUR 300,000.

2) Obligation for the creditor to have submitted a written proposal for a settlement to the debtor at least 3 months before the auction.

3) Discharge of a debtor for whom bankruptcy proceedings are not opened but who is registered in the Insolvency Register.

4) Extension of deadlines so that a vulnerable debtor can enter the interim program.

5) Extension of the possibility to settle loans guaranteed by the State through the resolution procedure.

6) Creation of a permanent mechanism for compensation of “ASPIS PRONOIA” claimants; resolving issues of compensation to beneficiaries of life insurance claims.