Securitization

The state's asset protection plan, dubbed Hercules, will render securitizations a more attractive instrument for the reduction of nonperforming exposures (NPEs) of Greek banks, Morgan Stanley says in a new report, while Germany's Scope Ratings notes that securitization conditions in Greece are improving.

Canada-based rating agency DBRS upgraded Greece's outlook from stable to positive on Friday, but stopped short of upgrading its credit rating from BB (low).

Therefore the country's rating remained three notches below the coveted investment grade, where DBRS had placed Greece in its previous review last May.

Revenues of 2 billion euros have reached the coffers of Greece's four systemic banks from transfers of nonperforming exposure portfolios to date, but after using these sales as the main instrument for reducing their bad-loan stock in the last couple of years, they are now focusing on securitizing portfolios.

The banks index at Athinon Avenue enjoyed a second consecutive day of gains in excess of 4 percent on Friday, building not only on the advance of the Heracles plan for the securitization of bad loans, but also on the upward momentum observed in foreign stock markets. That also led to the benchmark attaining growth just shy of 2 percent.

While the approval by the European Commission's competition authorities of a Greek plan to cut bad loans at the country's lenders by up to 30 billion euros is an "important step" in the right direction it will not be enough, and will have to be supplemented by the Greek central bank's proposal, Governor Yannis Stournaras said on Friday.

The European Commission on Thursday approved the Greek state's "Hercules" plan to reduce local banks' bad loans by up to 30 billion euros, and Deputy Finance Minister Giorgos Zavvos called on the country's lenders to utilize the project, making the most of the favorable market climate that cuts the cost of state collateral.

The Labor Ministry is examining a plan that would see the securitization of major debtors' dues to the social security funds and the concession of their management to third parties.

The asset protection scheme for the reduction of the bad loans in banks' portfolios has been dubbed the "Hercules Project" by the government, according to the proposal submitted to the European Commission by Deputy Finance Minister Giorgos Zavvos last Friday.

Alpha Bank is working on a plan for the securitization of its nonperforming loans and their management by an independent company to which the lender's competent staff will be transferred.

All four major Greek banks are expected, sooner rather than later, to issue Tier 2 bonds, even those which have already done so.
The total value of the bonds will depend on the Single Supervisory Mechanism's setting of Tier 1 capital requirements at the end of the year, but is estimated to come to 2.5 billion euros, including nearly a billion each for Alpha and Piraeus.