Adequacy of Provisions

Bank of Greece Governor's Act 2442/29 January 1999, as currently in force, lays down the ratios applicable to certain categories of credit institutions' non-performing loans for the calculation of minimum provisions. These minimum provisions are determined for supervisory purposes and are associated with the assessment of credit institutions' capital adequacy. The list of documents making up the institutional framework of this section is given below.
 
It should be pointed out that the internal control and risk management mechanisms which, on the basis of the principles established by the Bank of Greece, are employed by banks themselves ought to incorporate the necessary adjustments of criteria for granting or denying loans during the pre-assessment procedure. These criteria should acknowledge the dynamics of the economic environment and the effects of strong competition on risk assumption policy and rapid credit growth.
 
Document 1635/21 October 2005 further set the generally acceptable debt-to-income ratio in the pre-assessment stage at 30-40% and laid down the minimum factors to be taken into account for the calculation of the above ratio (income stability, level of income in absolute terms, adequacy of information etc.).

The competent departments of the Bank of Greece monitor the risk management systems of all banks to verify whether the above considerations are factored in, and take any additional measures required, including raising the Capital Adequacy Ratio.

List of Documents

Bank of Greece Governor's Act 2442/29 January 1999;
Bank of Greece Governor's Act 2513/15 January 2003;
Bank of Greece Governor's Act 2557/2005;
Bank of Greece Governor's Act 2565/2005;
Banking and Credit Committee Decision 254/7/2007.