Support grows for a 'bad bank' in Greece

Debt rating agencies have a positive view of the creation of a "bad bank" to handle nonperforming loans (NPLs) dragging down commercial banks' profits and ratings.

The so-called Hercules plan to restructure the loans "is good but insufficient," agency managers say, especially as the economic impact of the pandemic is expected to affect the volume of non-performing loans for the worse.

According to the latest Bank of Greece estimates, even after the implementation of the Hercules plan, with the securitization and sale of loans, NPLs will still exceed 25% of the total. This estimate, moreover, was made before the full extent of the effects of the pandemic was even suspected. We should note that Bank of Greece Governor Yannis Stournaras is the main proponent of a "bad bank" that would be saddled with all non-performing loans.

The idea of creating a bad bank, once...