On June 24, the Greek Parliament ratified a legislative amendment, which provides that interest on mortgage loans that have been restructured under the Katseli Law (3869/2010) will be calculated on the monthly installment set by court decision and not on the total outstanding principal, Moody's recalls in its analysis.
The provision applies retroactively and treats interest that has been overpaid by performing borrowers as principal already repaid, thus reducing the remaining balance of the loans and shortening their repayment duration. The 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 (Baa1 stable / Baa1 negative, baa3), Piraeus (Baa1 / Baa2 stable, ba1) and Alpha Bank (Baa1 / Baa2 stable, baa3) – amounts to approximately 700 million euros.
This amount includes about 500 million euros from the loss of future interest income on restructured mortgage loans of around 16.5 billion euros over a 20-year horizon, as well as 200 million euros relating 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 regarding their credit profiles, solvency, or profitability trajectory.
The 500 million euros corresponding to lost future interest income will be absorbed by the “Hercules” program (Hercules Asset Protection Scheme – HAPS), in order to cover any shortfalls in payments on Katseli Law loans and avoid any impact on the servicing of the state-guaranteed high-priority bonds (senior notes) held by the four banks. The remaining 200 million euros will be allocated approximately equally between the banks and the loan servicing companies (loan servicers), with no fiscal burden for the State.
We expect that the four banks will form additional one-off provisions in their third-quarter 2026 results in order to cover their share of the cost, the agency's analysts write.
The total immediate burden is limited compared with their total pre-provision income, which exceeded 6.5 billion euros in 2025. In addition, the cost could be absorbed by the existing additional provisions that bank managements have formed and remains significantly lower than their available capital buffers against the requirements of the Supervisory Review and Evaluation Process (Supervisory Review and Evaluation Process – SREP).
The banks posted Common Equity Tier 1 (Common Equity Tier 1 – CET1) ratios between 13% and 17% in March 2026, with the capital safety buffers maintained by their managements being more than sufficient to absorb such a one-off burden.
Three structural factors support the assessment:
- The majority of mortgage loans protected by the Katseli Law were removed from banks’ balance sheets through securitizations under the HAPS program during the 2019-2020 period, leaving only a small residual portfolio directly exposed to the new interest calculation.
- The exposure that banks retain in the relevant securitizations is concentrated mainly in the high-priority bonds (senior notes), which carry a state guarantee and protect them from the financial loss now absorbed at the HAPS level. By contrast, the medium- and low-priority bonds (mezzanine and junior tranches), which bear the largest part 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 securitization date of the loans — a relatively short period during which the loans still remained on balance sheet.
At the same time, we identify three potential risks, which we will monitor closely:
- Risk of legal challenges, if the exception that deprives borrowers whose arrangements have already been completed or have become overdue and non-performing of the right to a refund is successfully challenged before the Council of State.
- Risk of broader application, if borrowers who have entered the Out-of-Court Mechanism or bilateral restructurings invoke the decision through pilot trials, extending the scope beyond the initial cost estimate of 700 million euros.
- Risk of revising the scale of the burden, due to the divergence between the government’s estimate of 700 million euros and industry estimates that reach as high as 1.3 billion euros (based on a study prepared by KPMG on behalf of the association of loan servicing companies in Greece), which could increase the share of the cost that banks will bear after the revision of HAPS business plans.
None of the above risks is included in our baseline scenario. If any of them materializes, we will reassess our evaluation regarding the impact on the credit profiles of the four systemically important Greek banks, the analysts conclude.