Primary Greek Residence Report Positive, Fitch Says
Reforms to the system whereby financially weak Greek households can try to restructure their debts are positive for banks and Greek structured finance (SF) and covered bond (CVB) transactions, Fitch Ratings said in a report released on Tuesday.The credit rating agency said that these reforms should provide a more effective mechanism to work out the most problematic non-performing loans (NPLs), restrict strategic defaults and potentially lead to a more disciplined payment culture. The full impact will depend on implementation details and how the new framework is used. "The updated primary residence protection law that was passed at the end of March replaces the Katseli law, which had protected delinquent borrowers' primary residences from repossession," Fitch said in the report.
"Under the new framework, borrowers who were already more than three months in arrears on 31 December 2018 can apply online to restructure housing and business loans secured on their primary residence. Applications can be made until the end of 2019. The end-2018 cut-off point, the temporary nature of the scheme, and narrower eligibility criteria for protection from repossession than under the Katseli law, all reduce the scope for strategic defaulters to apply for protection," it added. "Combined with the threat of foreclosure, this could over time support an improvement in payment discipline.