4 suggestions for non-performing loans

Four proposals for non-performing (so-called “red”) loans have been place on the table by banks after the Euroepan Central Bank’s stress tests calculated that these loans amount to 107 billion euros.

Each bank needs to work through its portfolios of such loans and come up with the exact amounts. The deadline for this is expected to be set by the Bank of Greece and Credit Stability Fund somewhere around the end of February.

Daily newspaper Ethnos states that each bank will look at home mortgages, consumer loans as well as business debt. The Bank of Greece will also evaluate credit institutions ability to deal with these “bad” loans so as to manage to reach their targets. The Greek newspaper points to four considerations:

1. Exchange of mortgaged real estate with other property of smaller value

2. Cutting the debt into two portions where one part will be paid off normally and the other will be “frozen” according to a deal between the bank and the borrower.

3. Lengthening the terms of the loan to beyond the debtors lifetime with the burden following on heirs.

4. Transfer of real estate to the bank, with the debtor paying rent based on current prices.