Banks' Asset Quality
Hellenic Asset Protection Scheme (“Hercules” initiative)
The Hellenic Asset Protection Scheme (renamed to “Hercules” scheme) was an HFSF strategic initiative, implemented by the Ministry of Finance, designed to assist banks in securitizing non-performing exposures (NPEs) and moving them out of their balance-sheets. Under the first phase of the Scheme (Hercules I), the four systemic banks have submitted requests for utilizing the Scheme in order to securitize €31.3 billion (gross book value) of NPEs with a view to releasing their potential for the financing of households and corporations.
The immediate reduction of banks’ NPLs -at an affordable cost- coupled by the development of an active NPL market are among HFSF highest priorities. In this context, the Fund worked closely with all stakeholders involved in the task of NPL reduction, including Government Authorities, the Bank of Greece, the Single Supervisory Mechanism (SSM), Supranational Organizations, Investors, international banks and advisors, and the Greek systemic banks, in order to address the need for a systemic structural solution to address the reduction of NPLs.
Under the Scheme, an individually managed, private securitization vehicle will buy NPEs from the bank and dispose notes to investors. The State will provide a guarantee for the senior, less risky notes of the securitization vehicle. In exchange for such guarantee, the State will receive a commission at market terms. In November 2018, the HFSF sent an all-encompassing study to the Ministry of Finance for the development of the Hellenic Asset Protection Scheme. Throughout 2019, HFSF continued working closely with the banks and other stakeholders on the Hellenic Asset Protection Scheme (HAPS) initiative, also participating in the legal team responsible for the drafting of the relative Law. The Law was eventually approved by the Greek Parliament in December 2019. The successful Scheme was extended in April 2021 under the “Hercules II” programme, which is expected to run for 18 months, until October 2022. Greek banks are expected to continue to reap the benefits of “Hercules” and have unveiled new deals to be issued in the second phase of HAPS. As in the case of “Hercules I”, the Greek State will provide guarantees of €12 billion on the senior tranches of securitisations, which is the most secure part of the transaction.
In addition to the H-APS strategic initiative, the HFSF works closely with the banks and the authorities in order to facilitate the management of NPEs, whereas as per the provisions of the RFA, the HFSF provides its consent for the approval of the banks’ NPE Strategies and Operational Targets submitted to the SSM.
Having developed a robust NPL data management and reporting tool to analyze and benchmark banks’ performance on the NPE reduction front, the HFSF holds regular meetings with the banks to discuss latest developments and identify as early as possible reasons for potential deviation versus approved NPE Operational Targets, recommend mitigating actions and potential constraints. The latter has been a long-lasting focus of the Fund that has developed and updated twice an “Analysis of non-regulatory constraints and impediments for the development of an “NPL market in Greece”, as well as providing its comments and proposals for the new Insolvency Law.
Open and frequent communication with the banks is of paramount importance and is also taking place through the Hellenic Banks Association, where the Fund participates as an observer in the NPL Coordination Committee and the Fund’s participation in other interbank-initiatives such as the NPL Forum, established following HFSF’s relative proposal through its work on an “NPL resolution action plan to enhance coordination among banks and accelerate the restructuring of the Large Corporate NPLs”.
The Fund’s dedicated division, aim to act as a center of excellence, research, develop and promote international best practices and provide guidelines to ensure uniformity of solutions, acceleration of process and sharing of know-how in specific focus areas of NPE management in cooperation with domestic and international associations and with the assistance of external experts (as needed).