The Plenary Session of the Supreme Court (Areios Pagos) had been scheduled to examine the critical issue of the method for calculating and accruing interest on instalments for loans falling under Law 3869/2010, following a relevant appeal. The case concerns the interpretation of the law as to whether interest should be calculated on the total outstanding principal or solely on the instalment amount determined by the Court, based on the debtor’s income criteria.
By a broad majority, the Supreme Court adopted the opinion of Vice-President Sotirios Plastiras and ruled that interest on loans of borrowers who have been included under the Katseli Law shall be calculated on the basis of the monthly instalment rather than on the total amount of the outstanding debt. The official publication of the decision is expected in the near future.
The decision affects approximately 350,000 borrowers, significantly reducing their monthly instalments and rendering the loans virtually interest-free.
Objective of Law 3869/2010: Safeguarding a Minimum Standard of Living
Law 3869/2010 aims to provide a second chance to over-indebted natural persons who are permanently and demonstrably unable to service their liabilities. It provides for the restructuring and partial discharge of debts, whether overdue or not, subject to the payment of an amount determined by the Court on the basis of income criteria for a period of four years. During the restructuring period, a minimum standard of living is safeguarded. Upon completion of the arrangement or through an out-of-court settlement, the debtor is discharged from the remaining balance of their debts and gains the opportunity for a fresh financial start.
The total amount of obligations currently falling under Law 3869/2010 is estimated at approximately €12–13 billion. Although estimates and data exist regarding the number of court cases, no official and reliable time series has to date been published by the Bank of Greece or any other competent statistical authority that specifically captures the volume of non-performing loans (NPLs) subject to this law.
Significance Beyond the Legal Framework – Impact on the Real Estate Market
The significance of the decision extends beyond the narrow legal framework, as it is directly linked to the real estate market.
The ability of over-indebted households to restructure their loans and retain ownership of their primary residence directly affects property demand and valuation in Greece. Pending cases under the Katseli Law had created uncertainty in the real estate market, particularly with respect to properties serving as collateral for mortgage loans, as banks and investors were compelled to approach such assets with caution due to the risk of reduced liquidity or lower valuations.
Among other effects, the Supreme Court’s decision in favor of borrowers introduces greater stability, as it now clearly defines the level of instalments and the method of interest calculation. The risk of overturning existing restructuring arrangements is expected to decrease, while investor confidence is likely to strengthen, leading to a smoother adjustment of the real estate market in a country already facing significant structural challenges in housing supply.
Potential Implications for the “HAPS” Securitisation Programme
The decision has significant implications not only for borrowers and banks, but also for broader financial instruments such as the “Hercules” securitisation programme (HAPS – Hercules Asset Protection Scheme). The “Hercules” programme, which was introduced to enable banks to remove a large volume of non-performing exposures (NPEs) from their balance sheets through state guarantees and securitisations, has already contributed to a substantial reduction in NPLs and an improvement in banks’ capital adequacy.
According to analysis by the AUEB, since the introduction of Hercules I in October 2019, Greek banks have made significant progress in reducing non-performing loans, with the NPE ratio declining from 43% at the end of 2019 to 27% by March 2021. The extension of Hercules II for an additional 18 months was based on its positive impact to date, supporting securitisations with a total gross book value of €31.3 billion in NPEs. By the end of 2021, the NPE ratio had further decreased to 12.8%, confirming the substantial progress made in cleaning up the balance sheets of the Greek banking system (Bank of Greece, 2022).
Within the Greek banking system, the total loan stock amounts to €163.6 billion (June 2025, Bank of Greece), while the volume of non-performing loans has declined to approximately €5.8–6.0 billion, marking the lowest level since the crisis. Under the “Hercules” programme, NPLs totaling €40.7 billion had been securitised by December 2024, with corresponding state guarantees ranging between €15.7 and €17.9 billion (as of early 2025), contributing to the stability and soundness of banks’ balance sheets.
Share of the €40.7 Billion in Securitised Claims Falling under Law 3869/2010
It should be noted that no officially published data exist that specifically identify the non-performing obligations covered by Law 3869/2010 that have also been included in securitised claims under the HAPS programmes.
However, taking into account that:
- this category of loans is subject to more favorable repayment conditions,
- the credit risk of a household classified as “over-indebted” under the law remains comparatively higher than that of other performing bank assets,
- and banks manage their portfolios with the objective of optimizing shareholder value,
it is reasonable to infer that obligations falling under Law 3869/2010 have been included to a significant extent—if not in their entirety—within the claims securitised under HAPS.
Consequently, the Supreme Court’s decision to restrict interest accrual solely to the monthly instalments rather than to the total outstanding principal may potentially have a material impact on cash flows and negatively affect recovery projections within the “Hercules” framework.
Potential spillover effects may also arise for investment portfolios, an increased risk exposure for state guarantees, and repercussions in the secondary real estate market, where non-performing mortgage-backed assets constitute a significant portion of portfolio value.
The convergence of the legal interpretation of the Katseli Law, the stability of the “Hercules” securitisation framework, and underlying real estate market dynamics makes the Supreme Court’s ruling a decisive determinant for the evolution of NPL management in Greece, investor appetite for securitisations, and the medium-term prospects of the residential housing market.