European sources: Greece needs to immediately adopt systemic solution in reducing NPEs

European institutions are pressing for an immediate adoption of a systemic solution in reducing non-performing exposures (NPEs) as current goals set by Greek banks are considered to be ambitious but inadequate, European sources said on Tuesday.

The same sources said that even if Greek credit institutions were to achieve goals set by the end of 2021, the stock of NPEs will remain much higher compared with the European average. In any case, reducing NPEs by 54 billion euros is in itself a very ambitious goal, but after this reduction the rate of NPEs will be around 19 pct, significantly up from a 3.8 pct average rate in the EU.

It is for this reason, sources said, that it was necessary to bring forward the systemic tools proposed by the Finance Ministry and the Bank of Greece (Italian model) for a faster resolution of NPEs. At the same time, another cause of concern was the accumulation of real estate assets in banks’ portfolios as banks are forced to buy around 80 pct of real estate assets auctioned in the country.

Reducing NPEs will allow banks to release the necessary funds to finance the economy giving a boost to growth and to attracting foreign investments.

The issue of NPEs and the imperative need to achieve goals set for their reduction was in the focus of discussions between Bank of Greece governor Yannis Stournaras and visiting president of the Single Supervisory Mechanism (SSM) Andrea Enria, who also met with executives of the central bank and representatives of Greek banks and the Hellenic Bank Association.