ATHENS — Greece’s banking sector has made a strong recovery from the country’s financial crisis, but major challenges remain in its ability to fully support economic growth, according to a new analysis by European Central Bank (ECB) economists.
In a blog post published Saturday, ECB experts noted that while Greek banks are now more stable and profitable, a significant portion of private debt remains outside the banking system — limiting their capacity to expand lending.
From crisis to recovery
Greek banks were among the hardest hit during the country’s sovereign debt crisis between 2010 and 2015. They suffered heavy losses on government bonds, a surge in non-performing loans (NPLs), and a sharp decline in deposits.
At the peak of the crisis, bad loans accounted for nearly 50% of total portfolios, while deposits dropped dramatically, and the sector required multi-billion-euro bailouts.
However, in recent years, conditions have improved significantly. As economic stability returned, banks benefited from increased liquidity, stronger capital positions, and improved profitability.
“Greek banks are again able to finance households and businesses, supporting investment,” ECB economists said, noting that lending to non-financial corporations has risen, while mortgage lending is gradually recovering.
Strong profits and improved balance sheets
Greece’s four systemic banks — National Bank of Greece, Eurobank, Piraeus Bank, and Alpha Bank — reported combined net earnings of nearly €5 billion in 2025, driven by credit expansion and higher fee income.
Their non-performing exposure (NPE) ratio has dropped to below 4%, approaching the European average — a major turnaround from crisis-era levels.
The sector has also seen key structural changes. In 2024, the Greek government completed the full privatization of the four banks, which had previously been recapitalized with around €50 billion in state support.
Additionally, the ECB approved the resumption of dividend payments — ending a 16-year freeze.
The unresolved debt problem
Despite this progress, ECB economists highlighted a critical issue: a large volume of distressed loans has been transferred outside the banking system.
Since 2019, Greece has developed a secondary market for bad loans and implemented an asset protection scheme, enabling banks to securitize and offload around €57 billion in non-performing loans.
While this helped clean up bank balance sheets, it also shifted debt to loan servicers, leaving many households and businesses burdened with unresolved obligations — effectively excluding them from accessing new credit.
A barrier to growth
According to the ECB analysis, these unresolved debts now represent a significant drag on the economy.
“The assets involved are equivalent to roughly one-third of Greece’s GDP,” the economists noted, warning that addressing this stock of distressed debt remains one of the country’s biggest financial challenges.
Until that issue is resolved, the banking system’s ability to fully support economic expansion will remain constrained — despite its remarkable recovery over the past decade.
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