Bank of Greece warns of a rise in non-performing loans in 2016

28 July 2016
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In its overview of the domestic banking system, the Bank of Greece has issued a warning about the further rise in non-performing loans and called for an effective response.

According to the report of the Bank of Greece, the credit gap in the domestic economy at present is over 34.5 billion euros. Should the banks not carry out any portfolio changes, then there will be a rise of NPLs in 2016, even if macroeconomic conditions are normalized. This in turn, the BoG argues, can be a major source of instability in the domestic credit system.

As a result of the rising unemployment, tax hikes and introduction of capital controls in recent years, the ratio of non-performing loans in relation to all loans has increased on an individual basis from 39.9% in 2014 to 44.2% in 2015. The situation grew worse in 2016, with the ratio further increasing to 45.1%.

The Bank of Greece has warned the domestic banks to quickly take action to prevent the problem from further developing and has underlined the need for a comprehensive plan that will determine how premature outstanding debts may be managed.

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