According to Bank of Greece estimates and research, a reduction in non-performing loans will help reduce banks’ financial risk and drive down their funding costs, while also boosting their capital adequacy. This will gradually translate into higher loan supply and lower lending rates to businesses and households.
Meanwhile, business and household financial risk will decline as the economy recovers, producing valuation gains on their existing assets and higher returns on capital and real estate property. The creditworthiness of households and businesses will therefore increase, enabling further support to investment demand.