Greek banks are turning to securitizations of performing loans in an effort to free up capital and strengthen their ability to provide new loans to the economy.

Through synthetic securitizations, as performing-loan securitizations are called, banks have strengthened their liquidity pipeline with new loans of up to approximately €10 billion over the last five years and for the next two years.

Unlike “classic” securitization, where banks mainly sell nonperforming loans in their attempt to clean up their balance sheets, in synthetic securitizations the loans that are securitized are performing.

This tool is now being used massively by three of Greece’s four systemic banks – Alpha, Eurobank and Piraeus, with National Bank being the only one that has not used this tool due to the excess capital it has – in their attempt to finance the economy with new loans without burdening their capital ratios.

Eurobank has already securitized loans worth over €7 billion through successive such transactions since 2021, reducing its risk-weighted assets (RWAs) by over €2.5 billion.

The amount of RWAs released is gradually reduced based on the maturities of the bonds issued in the context of the securitization.

Accordingly, Piraeus Bank has securitized loans totaling €8.6 billion, releasing assets – after maturities – close to €2.3 billion, while Alpha Bank has securitized loans worth €3.8 billion, releasing approximately €1.8 billion.

Original Story: Ekathimerini
Edition: Prime Yield