Greek banks face new credit risks from rising interest rates

A potential new wave of non-performing loans (NPLs) in Greece is emerging due to rising interest rates. Unlike previous crises driven by strategic defaulters, this new risk stems from borrowers who have historically paid on time but are now struggling with the simultaneous rise in loan installments, energy costs, and daily living expenses.

Following the European Central Bank's decision on September 10 to raise deposit rates to 2.50%, the cost of money has increased by half a percentage point within three months. While Greek systemic banks are currently in a stronger position than in the past—with NPL ratios below 4% and strengthened balance sheets—concern is shifting toward loans that are not yet classified as non-performing but show increased credit risk.

Banks are closely monitoring a reservoir of loans where borrowers show signs of weakness, such as initial payment delays, the need for restructuring, or declining income prospects. This category of loans under increased surveillance represents a significant area of focus for financial institutions and policymakers moving into 2025 and 2026.