Athens Digest 26.02.2019

• HFSF’s Czurda: No loosening of bank risk assessment

• MinFin Tsakalotos meets BoG governor Stournaras to discuss the two proposals about NPLs

• Red tape, slow judiciary hindering recovery says top EBRD official in Greece

• Morgan Stanley issues mixed report card on Greek bank rescue

• Resolving a commercial dispute through the courts in Greece takes 1,580 days; Dianeosis think tank publishes a proposal to slash court time

# The head of Greece’s bank rescue fund HFSF says guarantees worth EUR 5 billion could help the country’s main banks shed EUR 15 billion in soared loans. Martin Czurda, CEO of the Hellenic Financial Stability Fund (HFSF), in an interview with the Greek financial daily Naftemporiki, says banks need to strike a balance between expanding credit and creating the risk of additional bad debt, stressing that conditions for assessing risks should not be eased. The HFSF, Czurda said, was working under the expectation that Greece’s NPL ratio would have to fall to single digits for the banking system to ultimately become viable and competitive.

# MinFin Eucild Tsakalotos met the Governor of the Central Bank Yannis Stournaras, yesterday. The discussion focused on tackling NPLs. HFSF as well as Bank of Greece have made their own separate proposals. Reportedly, both proposals will be implemented upon approval by the EU Authorities, starting from the HFSF’s one. The new legal framework will allow banks select the proposal which works for their bad loans portfolios.

# Sabina Dziurman, the EBRD director for Greece and Cyprus, has blamed excessive bureaucracy and the slow judiciary for holding back Greece’s recovery, but said the country had made very significant progress since she took up her post in 2015. “I firmly believe that Greece has all the ingredients to become a successful economy,” she told Greece’s semi-official Athens News Agency. “Stumbling blocks cited by many investors, foreign and Greek, are the immense amount of red tape and the very slow judicial system. These urgently need attention.” She added: “If there is room to reduce tax rates, then that would certainly be helpful as Greece does have the highest level of taxes in the entire region.”

# Greek plans to relieve banks of their bad debt burden have made progress but still face significant obstacles, U.S. investment bank Morgan Stanley has concluded after multiple meetings with Greek officials and banking executives. The bank said planned changes to the household insolvency law were positive, containing tougher protection criteria. But the scope of protection will be expanded, and planned government-subsidized payments could clash with European competition rules. Regarding the so-called bad bank solution to slash the NPL stock, potential obstacles include approval required by European institutions, with a green light bedded  even before the plan can be expanded further.

On our Radar: Dianeosis proposal to slash court time
Dianeosis think tank has published detailed proposals to upgrade the country’s justice system _ a reform touted as being central to building a modern economy. The Athens-based Research and Policy Institute, Dianeosis, published study led by senior judges and academics. The proposed reforms include merging courts, aggressively digitizing records, formalizing alternative dispute-resolution mechanisms to save court time, and education system changes. The Greek authors cited World Bank survey which found that “Resolving a commercial dispute through the courts takes longer in Greece than in any other European country _ about 1,580 days, or more than four years. Worldwide, only three economies have a longer process: Guinea-Bissau, Suriname, and Afghanistan.”