First, it could increase investor appetite for dormant bad debt stock, which totaled €71.2 billion on Sept. S&P Global Ratings believes Hercules will support Greek banks in their effort to clean up their balance sheets and pave the way for a decrease in NPE ratios in the system that is the highest in Europe (see chart 1). The government will extend first-loss guarantees on senior tranches of notes backed by pools of NPEs that Greek banks will securitize in return for a fee. Hercules aims to accelerate the cleanup of the massive stock of Greek nonperforming exposures (NPEs) through securitizations, similar to a plan Italy launched a few years ago. 12, 2019, and the European Commission concluded in October that it did not constitute EU state aid. The Greek parliament passed enacting legislation on Dec. The Greek government's long-awaited asset protection scheme for Greek banks-the so-called Hercules plan-is finally set to kick off. Hercules does not change our expectations for Greek banks' credit quality over the coming quarters because we have already factored in improving asset quality into our recent positive rating actions on four systemic banks.Yet, the government guarantee on senior tranches is only one factor that will determine whether Greek banks will take part in the scheme and to what extent. Greece's Hercules plan, which is formulated to help clean up the banking system's massive stock of nonperforming exposures, is in our view credit positive for the country's systemic banks.
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