Greece unveils salvage plan for its banks

Bloomberg

The Bank of Greece released details on how it proposes lifting much of the burden weighing on the country’s lenders under a complex plan involving securitisations and the shifting of tax credits.
The plan foresees the transfer to a special purpose vehicle of a significant part of banks’ non-performing loans at net book value, along with a portion of the deferred tax credits booked on the lenders’ balance sheets, the central bank said in its financial stability report.
The nation’s benchmark index of banks has plunged amid worries they won’t manage to escape the shackles of non-performing exposures without burning more capital — which they currently lack. When the central bank’s proposal was first reported by Bloomberg News, the stocks initially rallied — but soon resumed their rout.
To finance the transfer, the SPV will proceed with a securitization of three classes of notes, the central bank said.
Before that deal, banks are expected to restate, in consultation with the European supervisors, their targets for bad- loan reductions.
The goal is to cut the ratio of non-performing exposures to a single-digit ratio within three years.
The central bank estimated that transferring about 40 billion euros ($46 billion) of NPEs and 7.4 billion euros of tax credits would immediately reduce the stock of bad loans by 47 percent. At the same time, capital adequacy ratios for all systemic banks will remain in double digits.