Content area
Full Text
The Greek bank rescue fund is understood to be making plans for special purpose vehicles to which lenders would be able to transfer billions of euros of toxic loans off their balance sheets, but industry insiders and academics are skeptical about the plan, which they say is unlikely to become a reality any time soon.
Reuters reported Oct. 4 that the Hellenic Financial Stability Fund, created in 2010 to help guide banks through the financial crisis, is preparing a plan for an asset protection scheme as part of a wider strategy for cutting the country's bad loan burden. The plan would involve creating special purpose vehicles (SPVs) into which nonperforming loans could be transferred. These would then be turned into bonds, some of which would be guaranteed by the Greek state under a mechanism similar to Italy's GACS scheme, which has paved the way for bad-loan securitizations there.
The solution has similarities with the "bad bank" model that countries including Ireland and Spain used to clear up toxic debts in the years following the global and eurozone financial crises, in which soured loans were separated from banks' functioning exposures to help lenders recover.
Greek banks are swamped with [euro]88.6 billion of nonperforming loans, which accounted for 47.6% of all loans in the Greek banking system as of...