By Lefteris Papadimas ATHENS, March 21 (Reuters) - Greek banks are limited in their ability to finance growth, ECB economists said in a blog on Saturday, despite a remarkable recovery from the
Greece Faces New Loan Hurdles Despite Bank Crisis Recovery, ECB Notes
By Lefteris Papadimas
Greek Banking Sector: Recovery and Ongoing Challenges
Background: The Greek Banking Crisis
ATHENS, March 21 (Reuters) - Greek banks are limited in their ability to finance growth, ECB economists said in a blog on Saturday, despite a remarkable recovery from the economic crisis a decade ago, as a large part of the country's private debt is outside the banking system.
The Greek banking sector, which was bailed out during the crisis, suffered big losses on Greek government bonds, a surge in bad loans and a sharp drop in deposits between 2010 and 2015.
Impact of Non-Performing Loans and Bailouts
Non performing loans (NPL) reached almost 50% of their total loan portfolios, their deposits halved and they suffered multi billion losses from a 'haircut' on bonds they held.
Signs of Recovery in the Banking Sector
As macroeconomic conditions stabilized and confidence returned, banks benefited from strong liquidity, higher profits and better capital conditions, the blog post, which is not necessarily the view of the European Central Bank, said.
Improved Lending and Profitability
"Greek banks are again able to finance households and businesses, which supports investment. Loans to non- financial corporations have increased markedly and mortgage loans are recovering," the ECB economists said.
The four major Greek banks, National Bank, Eurobank, Piraeus and Alpha Bank, reported accumulated net earnings of almost 5 billion euros ($5.77 billion) for 2025, boosted by higher credit expansion and fee income.
Their NPE ratio fell to below 4%, nearing the average of European banks.
Privatization and Policy Changes
In 2024, the government fully privatized the four banks, which were bailed out with 50 billion euros of state money the previous decade, and the ECB approved a request to resume dividend payments after 16 years.
Persistent Hurdles: Non-Bank Debt and Distressed Loans
Creation of Secondary Bad Loan Market
In 2019, Greece created a secondary bad loan market and an asset protection scheme, helping banks to securitize and sell about 57 billion euros of non-performing loans.
Ongoing Challenges for Households and Firms
As a result a large slice of the problematic loans passed to loan servicers, leaving households and firms with unresolved debt effectively shut out of bank lending and "thus limiting banks ability to finance growth", the blog post said.
Scale of the Distressed Loan Problem
"The assets involved are equivalent to about a third of Greece's GDP. Dealing with this huge amount of distressed loans remains one of the toughest challenges," it added.
($1 = 0.8670 euros)
(Reporting by Lefteris Papadimas; Editing by Alexander Smith)
