The Greek Parliament has passed legislation (Law 4354/2015) to govern the assignment and/or the transfer of Non Performing Loan claims (NPLs), including provisions on:
• Obtaining a license from the Bank of Greece for Debt Management Companies and Debt Transfer Companies (DTCs) for Non-Performing Loans;
• The agreements assigning the management of claims; and
• The sale and transfer of claims from non-performing loans and credit agreements.
The growing rate of non- performing loans in the Greek financial system represents one of the major obstacles in the country’s effort for economic recovery. Since the beginning of the financial crisis, the NPL rate has increased dramatically, from 9.1% in 2010 to 35% in 20151. In absolute terms, non-performing exposures in the domestic banking system currently amount to €107b2, undermining the capacity of banks to lend in the recovery. As a result, the Third Economic Adjustment Program for Greece naturally placed NPL resolution at the epicentre of attention and identified it as a key reform, necessary to unlock the disbursement of subsequent tranches of economic assistance3.
So far, the effort to tackle the ever growing NPL problem of the Greek economy revolved around management policies within balance sheet and off-balance sheet. These measures however failed to slow down the rise of NPLs and when in 2015 banks began facing serious threats to their viability, a new approach was required. In this respect, Law 4354/20154, which came in force on 16 December 2015, represents the country’s first attempt to foster a secondary market, regulating the management, disposal and refinancing of NPLs through Asset Management Companies (AMCs) and DTCs.
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