On Thursday 10 October, the European Commission found that Greece's plans aimed at supporting the reduction of non-performing loans of Greek banks to be free of any State Aid.
Under the asset protection scheme (‘Hercules’), the Greek State will be remunerated in line with market conditions for the risk it will assume by granting a guarantee on securitised non-performing loans. If a Member State intervenes, as a private investor would do, and is remunerated for the risk assumed in a way a private investor would accept, such intervention does not constitute State Aid. The Greek measure “does not involve State Aid within the meaning of the EU rules”.
Commissioner Margrethe Vestager, in charge of competition policy, welcomed the fact that a market-compliant solution had been found with the Greek government “to tackle the stock of non-performing loans weighing on the balance sheets of Greek banks”.
‘Hercules’ is designed to assist banks in securitising and moving non-performing loans off their balance sheets.
The Commission's assessment showed that the State guarantees will be remunerated in line with market conditions according to the risk taken, i.e. in a manner that would be acceptable for a private operator in line with market conditions.
This remuneration will be guaranteed by the following elements: - the risk for the State will be limited since the State guarantee only applies to the ‘senior’ tranche of the notes sold by the securitisation vehicle; - the State guarantee on the senior tranche will only become effective if more than 50% of the non-guaranteed and risk-bearing riskier tranches have been sold to private market participants; - the State's remuneration for the risk taken will be compliant with market conditions (the premium will gradually increase according to the duration of the State's exposure).
The Commission will report on its State Aid decisions, “to inform our future thinking”, said Ms Vestager during a speech: http://bit.ly/2M4DUvz (Original version in French by Lionel Changeur)