THE GREEK POST HAPS WORLD AND CYPRUS NPL SECURITISATION

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Introduction

  • Since the 2008-2009 crisis, the Greek and Cypriot banks have experienced a rapid deterioration of their assets. In Greece this deterioration peaked in 2016 where the ratio of NPLs to total loans reached 48.5%, meanwhile in Cyprus this ratio peaked at 47.8% in 2014. Consequently, the banking systems of both countries implemented various strategies to improve the quality of their balance sheets.
  • The Greek government opted to implement the Hellenic Asset Protection Scheme (HAPS), also known as Hercules. The program was designed to assist banks in securitisations and moving non-performing loans off of their balance sheet by selling them to special securitisation vehicles, with the Greek state guaranteeing the senior tranches.
  • The Cypriot banking system transferred EUR 11 billion of their non-performing assets to the Cypriot asset management company, Kedipes, a private limited liability company. Throughout the years, Kedipes was able to sell over EUR 8 billion to various investors through securitisations. The success of the securitisations was driven by the fact that most Cypriot NPLs are secured, with an average of only 3.6% unsecured.
  • Despite the success of the strategies implemented by both countries, Greek and Cypriot banks still have NPLs to total loans ratios of 8.7% and 9.7%, respectively, which is well above the European average of 1.8%. Both countries are experiencing economic expansion and have shown resilience throughout the current unstable environment, with increasing inflationary and interest pressure. This economic expansion has helped support the market and the liquidity within the system. With favourable economic conditions and the intention to continue to improve the quality of the banks’ balance sheets, the securitisation market is expected to grow in the future.

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THE GREEK POST HAPS WORLD AND CYPRUS NPL SECURITISATION

4 Aug 2023

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