Arrears Resolution Process (ARP) within the framework of the Code of Conduct under L.4224/2013

What is the Code of Conduct under L.4224/2013 and what is the subject of its provisions?

The Code of Conduct under L.4224/2013 is drawn up by the Bank of Greece (BoG) for the management of Individuals’ and Enterprises’ loans in arrears and non-performing loans. It establishes the general principles as well as the rules of conduct for Banks & borrowers and adopts the best practices, which aim at reinforcing a climate of mutual trust, commitment and timely exchange of necessary information between the borrower and the Bank, in order for each side to be able to weigh the benefits or the consequences of alternative arrangement or final settlement solutions of loans in arrears. Within the aforementioned framework, the Arrears Resolution Process (ARP) is introduced for implementation by the Banks, as well as the borrowers facing financial difficulties.

Arrears Resolution Process (ARP)

What is the Arrears Resolution Process (ARP)?

It is the procedure stipulated by the Code of Conduct under L.4224/2013, as amended and currently in force, in accordance with the Decision 392/1/31.05.2021 of Credit and Insurance Committee of the Bank of Greece (BoG), for implementation by the Banks, as well as the borrowers facing financial difficulties. The ARP describes the stages, deadlines and the minimum content of information, that should be mutually provided by the Bank and the borrower, in order that the risks and repayment ability of each borrower can be evaluated properly.

To Whom is the Arrears Resolution Process (ARP) addressed to?

  • To the borrowers (debtors/guarantors) Individuals / Professionals and Small Businesses facing financial difficulties and being unable either to meet their debt repayment plan or a change in their financial situation is estimated that will lead directly to their inability to meet their loan obligations

The term “Small Business” denotes Legal Entities whose annual turnover in the past 3 fiscal years did not exceed an average amount of one million euros (€ 1.000.000).

Guarantors

Any provision applied to borrowers with debts in arrears shall apply accordingly to guarantors, based on the type of debt they have guaranteed (individual or enterprises debt).

Exceptions / Suspension

The application of Code of Conduct doesn’t include:

  • 1 Debts from loan agreements that have been denounced prior to 01/01/2015
  • 2 Debts against borrowers that do not exceed as a total of any of the following limits:

    • the amount of € 1,000 in case of borrowers – Individuals/Professionals,
    • the amount of € 5,000 in case of borrowers – Legal Entities – Small Business, as defined for “Small Business”
  • 3 Debts against Legal Entities that are not “Small Businesses”

Furthermore, the Bank, based on the current framework, has the possibility to suspend the start of ARP or to suspend already initiated ARP in the following cases:

  • The borrower has submitted an application for out-of-court debt settlement according to par. 1 of article 8 of Law 4738/2020 or the Institution has notified the borrower of an invitation for out-of-court debt restructuring according to par. 2 of article 8 of L. 4738/2020 and for the period until the end of the procedure without result for any reason.
  • The borrower has signed a debt restructuring agreement in the context of the out-of-court debt settlement procedure under article 5 of Law 4738/2020, which is not subject to the condition of consent of the State or Social Security Institution, and the Institution is bound by the above contract.
  • The borrower or the Institution or other creditor has submitted an application for ratification of the borrower's restructuring agreement and if such an agreement is ratified or concluded in accordance with article 41 of Law 4738/2020 or par. 5 of article 103 of Law 3588/2007, which is binding on the Institution.
  • The borrower or the Institution or other creditor has filed a claim for the borrower to be declared bankrupt and for the period until any rejection of the claim.
  • The borrower has submitted an application for inclusion in a procedure of L. 3588/2007 or L. 3869/2010 or L. 4605/2019 or L. 4469/2017, which is pending, or the issuance of a court decision is pending or the procedure itself is pending, or when the borrower has been subject to the procedure of article 68 of law 4307/2014, which is pending.
  • Applies the case e) of par. 3 of article 7 of Law 4738/2020
  • When the borrower-legal entity has been put into liquidation.
  • When third party creditors have taken legal action to secure the borrower's debts to them.
  • In any other case specifically provided by current legislation.

What are the benefits of the Arrears Resolution Process (ARP)?

  • The collaboration of Bank – borrower enables a suitable arrangement to be reached in a timely manner, as it is performed within a climate of mutual trust and honest exchange of information.
  • The adherence to the transparency rules as well as the detailed information of the borrower is ensured.
  • For the arrangement proposal or final settlement solution submitted to a borrower – individual, the minimum level of “reasonable living expenses” is also taken into account among other things.
  • In case of an agreement upon the arrangement proposal or final settlement solution within the aforementioned framework, the smooth repayment of debts is achieved, which may, where appropriate, limit the cost of the loan for the borrower and class actions and other litigations are avoided.

Which are the implementation stages of the Arrears Resolution Process (ARP)?

  • 1 Communication between borrower-Bank
  • 2 Submission of borrower’s financial data
  • 3 Assessment of borrower’s financial data and overall financial situation
  • 4 Submission of suitable arrangement proposal or final settlement solution of the borrower’s debts
  • 5 Process of borrower’s appeal assessment

Which are the types of arrangements or final settlement solutions offered by Piraeus Bank?

In response to its customers’ needs for servicing their debts in a way that is compatible with their financial capacity, Piraeus Bank has developed a wide range of solutions. On the basis of the financial data assessment submitted through the new process, the following choices will be considered as an example for the arrangement / final settlement of the borrowers’ debts:

I. Forbearance measures

  • Arrangements that decrease the monthly installment providing:
    • payment of a part of the interests, for a time period
    • decreased fixed installment by increasing the loan duration
    • decreased installment, which is readjusted gradually
    • increase repayment period
    • interest rate reduction

II. Resolution and Closure measures

  • Lump-sum cash payment
  • Partial advance payments with partial write-off of debts (at maturity)
  • Voluntary liquidation of part of the borrower's property

In addition, the following possibilities are given especially for businesses:

  • Transfer, on time, of a loan / credit installment
  • Adjustment of installments taking into account the seasonality in the borrower's liquidity

How is the “Cooperating Borrower” defined?

Within the framework of the Code of Conduct under L.4224/2013, a borrower is characterized as “Cooperating” when he complies with the following general principles of conduct with regards to his collaboration with the Bank and more particularly when:

  • Provides complete and updated contact data to the Bank [fixed-line, mobile and fax numbers, email, residence and work address]
  • Designates a relative or friend as an authorized representative, in case that the borrower is not available
  • Is available for a contact with the Bank or with anyone acting legitimately on its behalf and responds to the calls and letters with honesty and clarity within fifteen (15) working days
  • Discloses information regarding his current financial situation or regarding the change of his financial situation to the Bank with sincerity within 15 working days from the day of change in his financial situation or within fifteen (15) working days from the day on which the relevant information will be requested by the Bank or anyone acting legitimately on its behalf
  • Proceeds, either in person or through his representative, with the complete and sincere disclosure of information to the Bank or anyone acting legitimately on its behalf, and such information will have substantial implications to his future financial situation, within fifteen (15) working days from the day on which he will take cognizance of such information [e.g. fulfillment of requirements for receipt of allowance, appearance of new assets which will be acquired by the borrower (inheritance etc.), loss of assets ownership, dismissal announcements, terminations of leases, redemption of insurance products, profits in any form, etc.] and
  • Consents to the investigation of an alternative restructuring proposal with the Bank or anyone acting legitimately on its behalf, as laid down by the Code of Conduct under L. 4224/2013

What are the consequences of a non agreement?

  • Possibility of denouncing his financing agreement directly
  • Possibility of commencing the enforced recovery of debt (for instance foreclosure and auction of borrower’s assets)
  • Additional charges for default interests and court expenses
  • Danger of remaining liable for any outstanding debts after the completion of assets enforced sale processes

How are the “reasonable living expenses” defined?

In regards to individuals, the reasonable living expenses are calculated on the basis of the data provided by the Household Budget Survey (HBS), which is conducted annually by the National Statistical Service of Greece.

The assessment of the borrowers’ financial situation within the framework of ARP is performed by taking into account the 1st group of expenses, which are considered to be the most basic for the living of a household. The basic expenses included in the formation of the basket of households’ reasonable living expenses are the following:

  • All food expenses
  • All clothing and footwear expenses
  • All residence-related expenses
  • All expenses linked to transportation, maintenance and repair of means of transport as well as the insurance premium of the car-motorcycle
  • All expenses for the use of urban and extra-urban transport services
  • Expenses related to the repair and maintenance of durable household goods
  • All consumables for the usual household consumption
  • Expenses and services for individual cleanliness and beauty treatment and other personal items as well as expenses related to pets
  • Expenses related to information and education
  • All expenses for telephony and postal services
  • Expenses for health-related items and services
  • All expenses for training services
  • Expenses for social protection services
  • Expenses for other financial services