Nonperforming s or any other institutions are facing, moreover



The basic
thing a company has to do in order to manage its objectives is to take risks. This
means that without taking any risks the possibilities of achieving your goals
are not very high. As we know from the stock exchange; the higher the risks the
higher the return, in order to have profits you have to expose in many risks. The
issue is if you are able to realize what you have to face, this can be achieved
with the process of risk management. Especially, identifying risk management,
we are referring to risks which have to be controlled.  Thus, we call risk management the process of
making efforts to identify the threats and dangers that the bank s or any other
institutions are facing, moreover taking action by  analyzing  them in order to be able to  to make a specific program to solve or to reduce them. (, 2018)

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In recent
years most of the banks, especially the four big Greek banks, Alpha bank,
National bank, Piraeus bank and Eurobank, have found it difficult to overcome
their problems with their insolvent clients. For a long time, especially
after the crisis in 2008, they were seeing only a decline rate, except of some
rare times which they had a small growth but not for a long time .The most common  risk that especially banks are facing is the
credit risk.   This is a risk that a
lender of a loan is exposing to, because, when the bank issues a loan there is
an uncertainty about the borrower’s creditworthiness,  it is impossible to know if the borrower will
repay its loan or not.  This risk affects
mostly the banks but there are also some institutions that have to deal with it
too. Thus, they are buying nonperforming loans without knowing if they would be
able to collect it sometime. This situation lead the banks in a vicious circle,
making them unable to
release money as there is no liquidity, they cannot give new loans or
doing any activity that is needed money for their operation. (,

The term nonperforming loans, is referring to
the loans which are in default or they are close to it. This means that the
borrower of the loan is not able to pay it, for instance, because he/she is
unemployed. (Bank, 2018)

A loan can be characterized as non-performing
when have passed more than 90 days from the payments date, thus, the owner of
the loan has not paid interest and principal within a specified period.  (Bank, 2018)

An institution in order to reduce the risk and
also to clean up its balance sheet from the nonperforming loans that it is
holding, in the most cases is making an effort to sell them to other investors.
This is a risky situation especially from the investors’ side as these loans
would be dangerous for them; for instance, they may have huge financial
implications, such as to affect company’s profit or losses. (Staff, 2018)

In the case that the loan is considered
nonperforming, lenders are starting a mobilization, which means that if the
borrower has some property in his possession, which can be classified in home
loan or vehicle loan. Then, they start the process of foreclosure on home or
vehicle. On the other hand if the borrower doesn’t have any property in his
name then lender has no choice but to accept the situation, to be patient until
there is any kind of changes in that matter. (,

Source: World Bank, European Banking Authority
and International Monetary Fund (Bank, 2018)



Nonperforming loans, is a serious issue for the
banks, as they have big impact on them. In other words, the basic operation of
the banks is making profit from the interest incomes which are coming from the
performing loans, and after that, they keep them in order to extend new loans.
The problem comes when the borrowers are not keeping their payments
obligations, which means that they have not made any interest payments or
repaying any principal. The banks in order to face this situation must set
aside more capital in the case that these loans are not going to be paid. This
situation leads the banks to a dangerous path such as making them unable to
provide new loans, as a result bad implications in their profits. In addition,
the banks which include nonperforming loans in their balance sheet, must keep
an amount of money in the case that it needs to write off the entire amount of
the loan. The only way for banks to avoid that , as it is possible, to be
involved in situations like that, should try to minimize the number of the
nonperforming loans in order to continue their smooth operation, thus, earn
from the interest incomes and extending new loans. (Bank,


At a risk that Greek banks are still exposed to,
are the nonperforming loans.  Greek bank
system started to consider problems with the NPL from 2008 after the crisis.
Then the Greek banks entered in the global financial crisis with nonperforming
loans of 14.5 billion Euros, or about 5.5 percent of their loan books. However,
these numbers climbed to 106.9 billion Euros, or 51 percent, last year. The
banks weren’t able to finance their operation, rather lend to other sectors of
the economy. The combination of the continuing crisis and the reduction in
wages led to an increase of the nonperforming loans.  Banks with high NPLs are more vulnerable to
future disturbances, that high levels of them affect also both the financial
sector and the real economy. 
Furthermore, Non-performing loans have a negative impact on banks’
profitability, which means that due to them it is requiring an increase in
provisions and also an increase in the cost of their operation. (, 2018)

As we see nonperforming loans affect the banks’
performing, thus, banks are exposed in a serious risk of their viability.
Generally prevails economic stagnation and also there is no particular economic
development. (, 2018)

In 2014 the amount of the
nonperforming loans was more than 2.000.000 Euros. This number explain the
crisis that the households, entrepreneurs and small business were faced. (,

 For instance, households and small businesses
are unable to consume as the crisis has been affected them dramatically, many
people have lost their job, higher unemployment, and also there is a big
decrease in wages. The above reasons and also the high taxation have a huge
impact on the peoples’ incomes; this is a reason that led the households and
enterprises to not be consistent with the repayment obligations of their loan.
This is a situation that comes mainly from the banks that are responsible for
moving the money in the country in general. (MacroPolis, 2018)

 If these
problems, NPL, concern a significant part of the bank, then the financial
stability is exposed to a risk, also, there may be a weakening of the bank’s
capital base, potentially causing it insolvency or lack of liquidity. Sometimes
if the situation is very problematic, uncontrollably
high nonperforming loans, and also the bank is unable to manage it alone, there
is a possibility for the bank to go bankrupt. (MacroPolis, 2018)


In its interim Monetary Policy report, the Bank
of Greece revealed that the NPL ratio rose to 31.9 percent at the end of
December 2013 from 24.5 percent at the end of 2012. The breakdown per sector
showed consumer credit NPLs remain at the top with their ratio at 47.3 percent
(from 38.8 percent in 2012), followed by corporate loan NPLs at 31.8 percent
(from 23.4 percent) and housing loans at 26.1 percent (from 21.4 percent). (MacroPolis, 2018)


The evolution of the situation continues to
deteriorate, especially on June 28, 2015 when the capital controls were
imposed.  As we can see from the data,
there is a significant increase in the nonperforming loans; the percentage grew
to 44.2 percent in 2015, from 39.9 percent in 2014. This situation became worse
in the first quarter of 2016 this percentage grew to 45.1 percent. (MacroPolis,


3.39 Pireaus Bank

BOPR. AT Athens Stock Exchange


(Anon, 2018)


The four big Greek banks have plan to face the
problem with NPL and NPE, reducing the percentage of them NPE from 106.9
billion euro in September this year to 66. 7 billion by 2019, in that way the
ratio of the NPE will fall to 34 percent from 51 percent. Furthermore, they
will make an effort to reduce also the NPL ratio from 37 percent in September
to 20 percent by 2019.

Based on the Central bank, Piraeus bank,
National bank, Eurobank and Alpha bank, have some positive results from their
effort to manage these difficult situations that has plagued them for several
years. (MacroPolis, 2018) 


To conclude, In order for Greek
banks to recover, the government is the basic factor to help on that, at first
its necessary to complete its negotiations with the bailout review with the
country’s creditors. Furthermore, the basic thing that has harmed the banks all
this time is the huge amount of the non performing loans, this amount must
absolutely be reduced. Instead of selling the
loans as bonds to some institutions which in return they will only receive 5%
of the value of the original loan, the better alternative for the Greek banks
would be to reduce the loan its self, so that the borrowers can repay the loans
easier and lesser and more approachable amount. The banks in one hand win
because they also have some earnings instead of the 5% that they would if they
sold the loans to the institutions, and on the other hand the borrowers will be
happy since they will pay less.