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Moody’s and DBRS believe in the “Hercules” power
The European Commission’s approval of the APS, also known as “Hercules” is considered credit positive for the Greek banks, according to Moody’s. Hercules is expected to address the issue of bad loans. A vote of confidence is also given by DBRS, which commented that Hercules is ready to “lift” Greece.
Moody’s says the scheme will help reduce NPLs ‘large stock and thus improve the quality of banks’ assets. This will gradually enhance their lending capacity and ultimately their profitability. However there will be some impact on their capital levels in the period 2020-21.
According to DBRS, the scheme “will not immediately transform Greece’s financial situation”, but it is a very important step, which will strengthen the country’s banking sector. As the analysts explain, the government intervenes as a private investor as it did with the Italian GACS, and this is not state aid. However, the risk for the Greek state is very low. The DBRS believes that this pattern will be followed in other countries.