On June 24, the Greek Parliament ratified a legislative amendment stipulating that interest on mortgage loans restructured under the Katselis Law (3869/2010) will be calculated based on the monthly installment set by a court ruling rather than on the total outstanding principal, Moody’s notes in its analysis.
The provision applies retroactively and treats interest paid in excess by borrowers who are current on their payments as principal already repaid, thereby reducing the remaining loan balance and shortening the repayment period. This ratification follows a relevant decision by the Supreme Court in February.
The government estimates that the total cost for the four systemically important Greek banks—Eurobank (Baa1 stable / Baa1 negative, baa3), National Bank of Greece (Baa1 stable / Baa1 negative, baa3), Piraeus Bank (Baa1 / Baa2 stable, ba1), and Alpha Bank (Baa1 / Baa2 stable, baa3)—amounts to approximately 700 million euros.
This amount includes approximately 500 million euros in lost future interest income on restructured mortgage loans totaling approximately 16.5 billion euros over a 20-year period, as well as 200 million euros related to the retroactive recognition of interest that had been overpaid.
According to Moody’s, the cost is considered manageable for the banks and does not alter its assessment of their credit profiles, solvency, or profitability trends.
The 500 million euros corresponding to foregone future interest income will be absorbed by the “Hercules” program (Hercules Asset Protection Scheme – HAPS) in order to cover any shortfalls in loan payments under the Katseli Law and to prevent any impact on the servicing of the state-guaranteed senior notes (senior notes) held by the four banks. The remaining 200 million euros will be divided roughly equally between the banks and the loan servicers, at no fiscal cost to the government.
We expect the four banks to record additional one-time provisions in their third-quarter 2026 results to cover their share of the costs, the firm’s analysts write.
The total immediate impact is limited compared to their total pre-provision revenue, which exceeded 6.5 billion euros in 2025. Furthermore, the costs could be absorbed by the existing additional provisions set aside by bank management and remain significantly lower than their available capital buffers relative to the requirements of the Supervisory Review and Evaluation Process (Supervisory Review and Evaluation Process – SREP).
The banks reported Common Equity Tier 1 (Common Equity Tier 1 – CET1) ratios ranging from 13% to 17% in March 2026, with the capital buffers maintained by their management teams being more than sufficient to absorb such a one-time charge.
Three structural factors support this assessment:
- The majority of mortgage loans protected under the Katseli Law were removed from the banks’ balance sheets through securitizations under the HAPS program during the period 2019-2020, leaving only a small residual portfolio directly exposed to the new interest calculation.
- The banks’ remaining exposure to these securitizations is concentrated primarily in senior notes, which are backed by a government guarantee and thus protected from financial losses that are now absorbed at the HAPS level. In contrast, the mezzanine and junior tranches—which bear the bulk of the cash flow risk—are held by third-party investors.
- The banks’ retroactive liability is limited to the period between August 2010 and the date of the loans’ securitization—a relatively short period during which the loans remained on the balance sheet.
At the same time, we have identified three potential risks, which we will monitor closely:
- Risk of legal action, should the exemption—which denies the right to a refund to borrowers whose repayment plans have already been completed or have become past due and non-performing—be successfully challenged before the Council of State.
- Risk of expanded application if borrowers who have entered the Out-of-Court Mechanism or bilateral restructuring agreements invoke the ruling through test cases, extending the scope of application beyond the initial cost estimate of 700 million euros.
- Risk of a revision to the scope of the burden due to the discrepancy between the government’s estimate of 700 million euros and industry estimates reaching as high as 1.3 billion euros (based on a study conducted by KPMG on behalf of the Association of Loan Management Companies in Greece), a fact that could increase the share of costs borne by banks following a revision of HAPS’s business plans.
None of the above risks are included in our base-case scenario. If any of them materialize, we will reassess our evaluation of the implications for the credit profiles of the four systemically important Greek banks, the analysts conclude.