Bank of Greece backs new interest rules for Katseli loans, lowering payments for 100,000 borrowers

Endorsement from the central bank

Bank of Greece governor Yannis Stournaras described the government's legislative intervention as necessary, saying it resolved key questions arising from a recent Supreme Court ruling and reduced uncertainty. The provision, which the parliament approved last week, enforces a uniform application of the court's interpretation on interest calculation for about 100,000 performing borrowers who restructured their debts under Law 3869 (the Katseli law).

The provision the finance minister brought regarding the Supreme Court decision on Law 3869 was necessary. It answered reasonable questions that had emerged and ultimately benefited borrowers. It also defined the scope of the decision's application, thereby reducing uncertainty.

How monthly payments change

Under the new framework, interest is charged only on the specific monthly installment, rather than on the entire outstanding balance over the adjustment period. This effectively brings interest close to zero for most borrowers. The lower monthly payment takes effect immediately, and the adjustment applies retroactively: excess interest paid since the original court ruling will be netted against the remaining debt, shortening the repayment term.

A ministry example illustrates the shift. A borrower with a remaining balance of 144,500 euros in January 2024 would previously have paid 731 euros per month for 300 months, of which 74,852 euros would be total interest. With the new calculation, the monthly amount drops to 483 euros, with only one euro per month as interest and the rest going entirely to principal. The 7,440 euros in extra payments already made over 30 months are deducted from the total balance, so the borrower repays the loan in 255 installments of 483 euros. Total interest paid shrinks from 74,852 euros to 411 euros.

Impact on the Hercules programme

The changes affect the government's Hercules securitisation vehicle, which was used to package and guarantee non-performing loans. Minister of National Economy and Finance Kyriakos Pierrakakis noted that the lower receipts from the restructured loans will reduce future inflows to the programme. The legislation therefore splits the financial burden between banks and the Hercules programme based on the amounts each has already collected, aiming to preserve borrower protection, banking system stability and fiscal responsibility.

Transition and IT adjustments

The Union of Companies Managing Claims from Loans and Credits (EEADAP) stated that member servicers are now making the necessary technical changes to their systems. Full recalculation of all affected repayment schedules will take a few months. Until that work is complete, borrowers covered by the new rule will pay only the capital portion of their court-set monthly installment, with the installment amount itself unchanged. Any overpayments already made will be credited against the latest scheduled installments rather than refunded in cash.