In favor of borrowers and, at the same time, “clarifying” for future management, according to servicers, is the regulation submitted by the Ministry of National Economy and Finance following the Supreme Court’s decision on how interest is calculated on loans under the Katseli Law.
“The regulation is pro-consumer in nature,” banking executives and representatives from the servicers told Euro2day.gr, adding: “However, it clarifies the framework for both borrowers’ obligations and those of the Credit Management Companies.” The same sources estimate the potential loss on the “Hercules” securitizations at 700 million euros.
How the loss is allocated
Of the 700 million euros, 500 million euros will be borne by “Heracles”—that is, the Greek government—going forward and over a 20-year period. The remaining 200 million euros relate to retroactive adjustments for borrowers who have been in good standing and will be shared approximately 50-50 between banks/servicers and “Hercules.”
The retroactive payments and their associated costs for banks and servicers pertain to loans subject to court rulings during the 2016–2018 period, with payments extending through 2021. From 2021 onward, “Hercules” will assume the remaining costs for these loans.
“No Retroactivity”
As for any retroactive application for borrowers who lost (i.e., were found to be in default) their repayment plan, the legislative intervention by the Ministry of National Economy and Finance is, according to the same sources, clear.
“There is no issue of retroactivity—nor is one being raised—for those who lost their repayment plan due to nonpayment of installments,” they maintain. This is a government decision that has sparked backlash from the opposition.
As is well known, the government has excluded from retroactive application cases that have been closed or declared forfeited. “A retroactive review of these cases would create serious legal and systemic uncertainty, as it would require reopening thousands of old cases, many of which are based on court decisions dating back a decade.
Furthermore, in cases where the debtor has defaulted on the repayment plan, it means that a significant number of installments have not been paid. Therefore, there is no question of retroactive repayment for amounts that were never paid,” is the main argument.
However, both PASOK and Antonis Samaras have voiced objections to this decision.
The out-of-court settlement
The legislative intervention also protects those—whether under the Katseli law or with Swiss-denominated loans—who have joined the out-of-court mechanism. “The arrangements entered into through the Out-of-Court Mechanism continue to be governed by the current framework.
The monthly payment under the out-of-court arrangement is calculated as an amortizing installment based on the total amount of the debt being restructured, rather than on the monthly payment itself, as already provided for by law, regulatory acts, and restructuring agreements,” clarifies the Ministry of National Economy and Finance.