Greece’s four systemic banking groups can now turn to defaulted loans that have been successfully regulated and are regularly repaid to increase their asset and loan portfolios.

Since the supervisory authority (SSM) has not yet given the green light for banks to directly buy back loans they have sold or securitised themselves, the secondary market is open to them in two other ways.

The first is to refinance the loans individually. In this case, the bank grants the borrower, whose debt is in a fund, a new loan to repay the original one. In this indirect way, the loan returns within the banking system, which the banks have received official information about from the authorities. The second way is to buy packages of loans that have been sold or securitised by other banks in the past. The current ban on the repurchase of restructured exposures applies only to loans originated by the bank itself, and not to loans originated by third parties.

NPL management companies have already begun preparations, categorising well-performing exposures to facilitate the creation of packages that can be returned to the banking sector. Analysts estimate that, although banks have not announced any immediate moves, we are likely to see the first transactions in this category later this year, acting as a “test” for the market. These changes will also depend on the course of general credit expansion.

According to official data from the Bank of Greece for the first quarter of 2025, credit expansion rates remained strong. The annual rate in the private sector was above 10 per cent, while corporate credit balances grew by 16 per cent per year. For households, the change in credit stabilised at -0.5%, with the prospect of turning positive. The contraction in mortgage lending was significantly limited in March to -2.4 per cent, the smallest decline in many years, thanks to an increase in new mortgage disbursements (+30 per cent in the two-month period from January to February 2025 compared to 2024).

Although banks now have new ways of bringing defaulted loans back into their portfolios, the use of the secondary market will probably depend on whether the current rate of credit expansion is sufficient to meet banks’ targets this year, although the first quarter data show a positive trend.

Original Story: Money and Life
Edition and translation: Prime Yield