NPLs are economy’s weakest link

European Central Bank Vice President Luis de Guindos warned on Monday in Athens that the high level of nonperforming loans held by Greek banks represent the soft underbelly of the country's economy, stressing that all instruments should be used for their reduction.

However, the activation of the Hercules scheme continues to hang on resolving the question of the provision (or not) of any additional collateral by the Greek state so that the senior bonds to be issued will be considered zero-risk.

Sources say that the ECB's Single Supervisory Mechanism (SSM) is continuing to press for those guarantees while the state refuses to set aside any cash from bonds or the cash buffer for that purpose.

A Finance Ministry source argues that the matter will eventually be tackled on an individual bank level when each lender addresses the regulator for the assessment of its...