Senior Executives Resign From Greece's Bank Rescue Fund

ATHENS—Greece's bank rescue fund said Wednesday that its chief executive and deputy chief executive have stepped down as Greek lenders struggle to get a grip on the €100 billion ($111.3 billion) of bad loans brought on by the country's economic downturn.

The news comes during a broader shake up of management at Greek banks demanded by international creditors—the International Monetary Fund and eurozone nations—who are calling for the better handling of bad loans to free up fresh credit to the economy.

The fund said that the three members of its executive board—chief executive Aris Xenofos, deputy chief executive George Koutsos and executive board member Anastasios Gagales—have all submitted their resignations, effective as of July 18.

"The executive board submitted its resignation to pave the way for the future role the fund will play in the banking system and the Greek economy," it said in a statement.

Founded in 2010, the fund—called the Hellenic Financial Stability Fund (HFSF)—was set up to help oversee three recapitalizations to the sector completed with the help of state aid as part of international rescue money provided to Greece to prevent the country from going bankrupt.

Others tasks completed by the fund involved helping assess the boards of the country's top commercial lenders as part of a management overhaul to the sector currently in progress.

However, delays in convincing banks to tackle non performing loans prompted a negative review of the HFSF's executive board by an independent committee set up within the fund, called the Selection Panel.

Last week, the Selection Panel demanded their resignations in a report believed to have been sent to the Finance Ministry, according to a senior bank official.

The final decision on their resignations will be made by Greek Finance Minister Euclid Tsakalotos, although he is widely accepted to agree with their decisions. The Finance Ministry declined to comment.

About one in two loans held by Greek banks are nonperforming, representing some €100 billion. Greece is stumbling through its seventh year of an economic slump that has wiped more than a quarter of its economic output and sent unemployment levels to around 25%.

Despite a series of laws having been passed since late last year allowing for reforms to the management of bad loans, Greek banks have been reluctant to sell underperforming assets directly to private equity groups, citing very low offers made on the loans.

Greek bank executives argue that many of the large corporate loans simply need to be restructured and should not be sold off at a loss to third parties.

In one of the few deals seen in the sector, U.S. based KKR & Co. signed an agreement with two of Greece's leading banks to manage up to €1.2 billion of their problem loans, in a deal announced in May.

KKR will help manage underperforming assets owned by Eurobank and Alpha Bank, Greece's third and fourth largest lenders respectively, via its platform, known as Pillarstone.

Write to Stelios Bouras at stelios.bouras@wsj.com

(END) Dow Jones Newswires

July 06, 2016 08:25 ET (12:25 GMT)

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