Greece to guarantee up to 20bln Euros of banks’ “bad loans”

8 October 2018
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The government is exploring the prospect of setting up a scheme to protect the country’s banking system in the wake of Wednesday’s banking shares crash, a source close to the Greek government has revealed. According to the sources, the solution is called APS (Asset Protect Scheme). The goal is to create a special purpose “vehicle” for each bank that would act as an Asset Management Company or Asset Protect Scheme for banks to “park” their bad or red loans. This would aid banks to discard problematic, non-performing loans and receive a portion of the total amount to cover the loans.

Finance Ministry staff noted the set up would not be “a bad bank” as such, as the country’s creditors would also be opposed to such a solution.
The problem, however, is who would cover part of the loans i.e the 5 or 10 billion euros at least, as estimated, to take over the management or the risk of losing such loans.

Given the difficulty in finding private entities willing to participate in the cost, the government is mulling the prospect of the state providing funds to cover part of the loans to the banks. The money will most likely be drawn from the $30 billion security fund earmarked for exiting in the markets.
These funds are loans from the 3rd Memorandum with which Greece was to cover future sovereign debt payments or to buy out outstanding debts from the ECB and the IMF at discounted rates.

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