The Bank of Greece has given a “vote of confidence” to the government’s legislative measure mandating the universal application of the Supreme Court’s ruling on loans under the Katselis Law.
Bank of Greece Governor Yannis Stournaras believes that “it was necessary,” emphasizing that this legislative initiative reduces uncertainty.
As Mr. Stournaras told the Athens-Macedonian News Agency (ANA-MPA): “The provision introduced by the Minister of Finance regarding the Supreme Court’s decision on Law 3869 was necessary; it provided answers to reasonable questions that had arisen and ultimately benefited borrowers. It also defined the scope of application of this decision, thereby reducing uncertainty.”
It should be noted that under this specific provision—which was passed by the Plenary Session of Parliament last week and applies to approximately 100,000 borrowers who are covered by the Katseli Law and are current on their payments— their monthly debt service payments are drastically reduced, as their interest rates are effectively reduced to nearly zero. At the same time, the method for calculating interest (on the monthly payment) is being applied retroactively, resulting in the offsetting of the excess interest borrowers have paid in the past against their current debt.
For example, a borrower—who had an outstanding balance of 144,500 euros in January 2024—would, under the previous calculation method, pay a monthly installment of 731 euros for 300 months, whereas under the new calculation method, the installment is 483 euros, of which 482 euros represent the principal repayment—to pay off the loan principal—while the interest is just 1 euro. The excess amount that this borrower has been paying from 2024 to the present (731 – 483 = 248 euros) for 30 months—that is, 7,440 euros—will be deducted from his total debt.
Consequently, instead of having 270 installments remaining to repay the loan, this amount is deducted from the installments he has left to pay, and he will ultimately pay 255 installments of 483 euros. In other words, instead of paying 74,852 euros in interest, the borrower will pay only 411 euros.
Regarding the impact the new regulation will have on the HERACLES program, that is, on the guarantee offered by the Greek government for the securitization of non-performing loans, Minister of National Economy Kyriakos Pierrakakis estimates that the reduction in installments will result in lower future revenues for the “HERACLES.”
A regulation provides for a fair distribution of the relevant financial burden between the banks and the “HERACLES” state guarantee program, based on the amounts each party has received. This approach strikes a balance between social protection, financial stability, and fiscal responsibility.
Specifically, the total impact is estimated to be approximately:
- 500 million euros over a 20-year period, due to lower installments on loans totaling 16.5 billion euros
- an additional approximately 200 million euros from the retroactive application of the measure.
However, a significant portion of the retroactive costs will not be borne by the government, as they will be covered by the credit institutions themselves.
It should be noted that the arrangement does not apply to cases concluded through the Out-of-Court Mechanism, which 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.