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Non-Performing Loan Transactions (NPLs) in Greece - A Sneak Peek at the Legal Framework

posted 3 years ago

In Greece, during the last 3 years, non-performing loan transactions have seen an outburst, peaking at 7.6 billion in 2019. Undoubtedly, the tailor made and updated legal framework has significantly assisted the interesting parties in this area of distressed M&As. 

In 2015 the Greek Parliament passed the law on the assignment of receivables from loans and credits from credit or financial institutions, which significantly simplified the process of selling and transferring non-performing loans (NPLs) in Greece.

The current law sets first of all specific conditions for the subjects participating in the sale and assignment of these receivables. It provides for that the seller must be a credit or financial institution, while the buyer must be a company acquiring receivables from loans and credits.

The scope of the sale and assignment agreement includes receivables under loans and credits which have been granted or are being granted by credit or financial institutions, as well as any other rights related to the receivables being assigned, even if they are not auxiliary rights in the sense of article 458 of the Greek Civil Code.

Receivables under a loan are both the receivables for the payment of the principal amount and of the (contractual and lawfully accrued) interest, compounded interest, expenses etc.

On the other hand the sense of a credit (facility) presents particular difficulties in terms of interpretation, since it is not specified in Greek legislation. For this reason, it is necessary to synthetically interpret various provisions of law in which reference is made to the term in order to clarify its meaning.

The Law does not provide a specific definition for the sense of credit. However, it is accepted in Greek legal theory that it includes in its scope of application any form of credit in the sense analyzed above, to the extent it is assignable and may constitute the object of the receivables sale and assignment agreement.

It is very important to stress out that the Law expressly provides that any agreements between the assigning credit or financing institution and borrowers for non-assignability of the receivables do not oppose to the assignee. In other words, in case there are clauses for non-assignability or even a provision for the necessary of obtaining an approval for any assignment of receivables from the loan or credit, such clauses are ineffective.

As the Bank of Greece states, the outbreak of the pandemic has changed the rising trend of NPL transactions. As a result, banks have revised their securitization plans in terms of timing and loan perimeter. This will delay the further reduction of the high stock of NPLs. At the same time, despite the positive measures taken by the government and banks, an inflow of new NPLs is expected, especially from early-2021.

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