The European Commission announced, on Tuesday 28 November, that it had authorised the re-introduction of the Greek asset protection scheme for Greek banks known as ‘Hercules’ which had expired on 9 October 2022 (see EUROPE 12346/6). This scheme is designed to extract non-performing loans (NPLs) from the balance sheets of beneficiary Greek banks through a state-guaranteed securitisation mechanism.
In practice, a private securitisation vehicle buys NPLs from banks and offers securitisation products to investors.
These impaired financial products will thus be removed from the balance sheets of the Greek banks benefiting from the mechanism.
However, in the past, the mechanism has raised concerns among critics, who identified a risk for debtors of being exposed to non-bank market players.
The Greek government’s support will take the form of a public guarantee for the senior tranche of the securitisation vehicle. The European Commission indicates that an independent rating agency, approved by the European Central Bank (ECB), will identify the rating of this less risky tranche.
In return for this guarantee, the Greek State will be remunerated in accordance with market conditions based on the risk incurred. The guarantee premium will increase in proportion to the degree and duration of the risk.
In addition, the Greek government’s guarantee will only be effective if more than half of the riskiest, non-guaranteed tranches have been successfully sold to private market operators.
The Commission states that this intervention did not constitute State aid, since the Member State intervenes in this context as a private investor would and, for the risk borne, receives a return comparable to that which a private investor would accept.
In addition, the European Commission indicates that smaller Greek banks could be encouraged to use the mechanism.
The scheme will apply until the end of December 2024. (Original version in French by Émilie Vanderhulst)