A “vote of confidence” in the government's legislative regulation, which imposes universal application of the Supreme Court decision for the loans of the Katseli Law, is given by the Bank of Greece.
The Governor of the BoG, Yannis Stournaras, believes that “it was necessary,” emphasizing that this specific legislative initiative reduces uncertainty.
As Mr. Stournaras told ANA-MPA: “the provision introduced by the Minister of Finance regarding the Supreme Court decision on Law 3869 was necessary, provided answers to reasonable questions that had arisen and ultimately benefited borrowers. It also defined the scope of the application of this decision, thus reducing uncertainty.”
It is recalled that with this specific provision, which was voted through by the Plenary of Parliament last week and concerns approximately 100,000 borrowers who have been included in the Katseli Law and are current on their payments, the monthly installment for servicing their debt is drastically reduced, as their interest is practically almost zeroed out. At the same time, retroactive effect is imposed on the method of calculating interest (on the monthly installment), with the result that the additional interest paid in the past by borrowers is offset against their current debt.
For example, a borrower - who had an outstanding debt balance in January 2024 of 144,500 euros, under the previous calculation method would pay a monthly installment of 731 euros for 300 months, while under the new calculation method the installment becomes 483 euros, of which 482 euros represent the principal repayment - for the repayment of the capital - while the interest is just 1 euro. The excess amount that this specific borrower was paying from 2024 until today (731 -483 = 248 euros) for 30 months, that is 7,440 euros, will be deducted from his total debt.
Therefore, instead of having 270 installments remaining today for the repayment of the loan, this amount is deducted from the installments he has to pay and he will ultimately pay 255 installments of 483 euros. That is, the borrower, instead of paying 74,852 euros in interest, will pay only 411 euros .
Regarding the impact that the new regulation will have on the HERCULES program, that is, the guarantee offered by the Greek State for the securitization of red loans, the Minister of National Economy Kyriakos Pierrakakis estimates that the reduction in installments entails lower future collections for the “HERCULES” guarantee program.
The regulation provides for a fair allocation of the relevant financial burden between the banks and the state guarantee program “HERCULES,” depending on the amount collected by each side. In this way, a balance is achieved between social protection, financial stability and fiscal responsibility
Specifically, the total impact is estimated at approximately:
- 500 million euros over a 20-year period, due to the lower installments on loans totaling 16.5 billion euros
- an additional approximately 200 million euros from the retroactive application of the regulation.
However, a significant part of the cost of the retroactive amounts will not burden the State, as it will be covered by the credit institutions themselves.
It is noted that the regulation does not concern cases concluded through the Out-of-Court Mechanism, which continue to be governed by the current framework. The monthly installment in the out-of-court mechanism is calculated as an amortizing installment on the total amount of the regulated debt and not on the monthly installment, as already provided by the law, the regulatory acts and the settlement agreements.