Rating agency Moody’s has estimated that while the impact of recent legislative intervention regarding loans under the Katseli law is not negligible for Greek banks, the associated costs remain manageable due to their robust capital position and significantly improved profitability in recent years.

In its report, whose findings were shared by Greek business outlet Newmoney, the agency stated that the change in the method for calculating interest on these specific loans is not expected to materially alter the credit profile of the banks.

Despite this stability, the agency identified three primary risks that the market should monitor closely in the coming period.

The first concerns the reduction of future cash flows from these specific portfolios.

The readjustment of debts limits expected interest income, thereby affecting the economic value of the claims linked to these cases, according to Moody’s.

The second risk relates to the securitisations of non-performing loans included in the Hercules programme.

If recoveries prove lower than those projected in the business plans of the transactions, pressure may be exerted on the performance of certain securitisations, increasing uncertainty regarding future receipts, the agency reported.

The third parameter concerns legal risk. There remains an open possibility for new claims to be created or for attempts to extend this specific interpretation to other categories of regulated loans, a development that could increase costs for the financial sector, Moody’s stated.

Notwithstanding these points, the agency believes that Greek banks are in a clearly stronger position today compared with previous years.

The drastic reduction in non-performing exposures, the strengthening of capital, high organic profitability and the significant provisions that have already been formed act as key safeguards against potential burdens.

Moody’s also estimated that government intervention limits the uncertainty created after recent judicial developments, offering greater predictability to both banks and asset management companies.

Interest is now turning towards the method of implementing the new regulation, as well as the potential impact it may have on future judicial decisions and the valuations of relevant portfolios.

For now, Moody’s concluded that the consequences remain absorbable by the Greek banking system and do not overturn the overall positive picture it maintains for the sector.