The intense concern over geopolitical developments and the effects on energy prices has made the SSM stricter in investigating the quality of loan portfolios, with emphasis on mortgages, in all eurozone countries.
Hence, for the time being it appears reluctant to respond to the intention of the banks of the Eurosystem – which also includes the Greek banks – for a “freeze” of interest rates on mortgage loans in view of the new increases expected from the European Central Bank.
The SSM’s reservation is, according to the information, heightened regarding any intervention in mortgage loans.
In any discussion on this matter, the management of the European Supervisory Mechanism asks banks to proceed – through exercises on mortgage portfolios - to the investigation of customers’ future ability to meet their obligations, a fact that brings to the forefront the fear of supervisory requirements.
In the foreground regarding the parameters of the future ability of mortgage borrowers, according to information, the SSM places the issue of the loan’s maturity and specifically the age of the borrower, which in Greece in the majority of mortgage loans has a duration up to the 70th year.
UTPs also in the frame
The heightened sensitivity of the supervisory body also touches, according to the same sources, performing mortgage loans that belong to the UTP category (Unlikely To Pay), that is, those that lie between a normally serviced loan and a red loan. According to the same sources, there is a discussion for these loans to be moved to non performing given the increased risk of their becoming non-serviced.
Step-up a red flag
The SSM’s caution regarding the adoption of practices such as the freezing of interest rates was intensified, according to the same information, by the step-up arrangements of mortgage loans. After these, the SSM’s recommendation to banks is that any intervention of this kind should be preceded by an investigation of the borrower’s future ability to service their obligations.
An investigation that increases the fear of additional supervisory requirements.