Existing Corporate and Household Insolvency Frameworks: Characteristics, Weaknesses and Necessary Reforms

Spyros Pagratis, Christina Lolou and Nikolaos Vettas
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Spyros Pagratis: Athens University of Economics and Business
Christina Lolou: Crowe Horwarth
Nikolaos Vettas: Athens University of Economics and Business

Chapter 14 in Non-Performing Loans and Resolving Private Sector Insolvency, 2017, pp 337-362 from Palgrave Macmillan

Abstract: Abstract The chapter analyzes the characteristics of the Greek insolvency framework, focusing on its weaknesses and the interaction with prudential requirements for banks. This interaction has possibly contributed to the perpetuation of the NPL problem in Greece, discouraging a viable solution to the problem. That was a result of alignment of borrower incentives to apply for restructurings and creditor incentives to restructure overdue debts, regardless of the future debt-servicing capacity of borrowers. Creditor incentives to restructure were driven by the need to economize on bank capital and reduce the capital bill ahead of the large-scale recapitalization of the Greek banking sector. Recent and forthcoming reforms, such as the Capital Requirements Regulation and Directive (CRR/CRD IV), the Bank of Greece Code of Conduct for the non-performing loans’ management and standard IFRS 9 for accounting provisions, could mitigate perverse incentives among borrowers and creditors. That could contribute towards a viable solution to the Greek NPL problem.

Keywords: Non-performing loans; Greek banking system; Insolvency framework; Capital requirements regulation; Borrower and creditor incentives (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-319-50313-4_14

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DOI: 10.1007/978-3-319-50313-4_14

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