EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 10 April  2015  
on the prohibition of the auction of primary residences  
(CON/20 15/14) 
 
Introduction and legal basis  
On 4 March 2015 t he European Central Bank (ECB) received a request from  the Greek Ministry of 
Economy, Infrastructure, Maritime Affairs and Tourism  for an opinion on a draft law introducing provisions 
for suspending auctions of  the primary residences  of eligible  debtors (hereinafter the ‘draft law’).  
The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the sixth indent of Article 2(1) of Council Decision 98/415/EC1, as 
the draft law relates to  rules applicable to financial institutions ins ofar as they materially influence the 
stability of financial institutions and markets . In accordance with the first sentence of Article 17.5 of the 
Rules of Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 
1.  Purpos e of the draft law 
The stated purpose of the draft law is to tackle the current humanitarian crisis  in Greece by protect ing 
eligible  debtors  from the auction of their primary residences.  Guarantors of eligible debtors are also 
granted protection from the auction of their property. Under the draft law , for a period of  two mo nths from 
the publication of the law or from the service of a notification for execution, debtors may establish that 
they are eligible for protection . The ECB understands that the protect ion offered under the draft law is 
limited to the prohibition  of auctions , without impeding the foreclosure process for  the protect ed 
properties.  
Under the draft law, the auction by banks of primary residences , the objective value , for tax ation  
purposes , of which does not exceed EUR 300 000,  is prohibited. This prohibition will apply  until 
31 December 2015. In order to be eligible for protection, debtors must fulfil , notably , the following criteria: 
(a) their net annual income must not exceed EUR 50 000;  and (b) the total value of their movable and 
immovable assets  must not exceed EUR 500 000 , of which the total amount of deposits and other 
movable assets  in Greece and abroad on 20 November 2013 must  not exceed EUR 30 000 (periodical 
benefits from insurance and pension schemes  are excluded) . During the prohibition period beneficiary 
debtors with an annual household income of up to EUR 35 000 are obliged to pay to the creditor a 
monthly instalment equal to 10% of their  net monthly income.  If the annual family income exceeds the 
threshold of EUR 35 000 the debtors are obliged to pay to the creditor a monthly instalment equal to 10% 
                                                 
1  Council Decision 98/415/EC of 29 June 1998 on the consultation of the European Central Bank by national 
authorities regarding draft legislative provisions ( OJ L 189, 3.7.1998, p. 42) . 
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2 up to the threshold of EUR 35 000 and 20% on the incremental income above that threshold. More 
vulnerable categories of debtor s are granted protection under more favourable conditions.  
The protection afforded by the draft law  is subject to compliance by  debtor s with the duty to disclose  their 
property and account transactions . Furthermore, if a debtor does not comply  with the obligati on to pay the 
envisaged instalments for six consecutive months, the protection will be suspended.   
 
2. General observations  
2.1 The ECB understands that the draft law aims at reintroducing the prohibition on auctions of  the 
primary residences of eligible d ebtors  following the expiration of the pre- existing framework of 
Law 4224/20132 at the end of 2014. The ECB notes that Law 4224/2013 was adopted in 
December  2013 as a temporary scheme offering protection to eligible households from auctions of 
primary resi dences. The ECB notes that, in comparison with Law 4224/2013, the draft law sets out 
significantly  broader eligibility criteria in terms of the value of the protected property, the annual 
household income, the value of  immovable and movable assets and the amount of deposits . Under 
Law 4224/2013 , which already provided broad protection clearly going beyond the most vulnerable 
households, the protection from auctions was granted provided, inter alia, that:  (i) the objective 
value , for taxation purposes, of the primary residence did not exceed EUR 200 000, whereas  the 
draft law sets a threshold of EUR 300 000; (ii) the debtor’s annual household income did not 
exceed EUR 35 000, whereas  the draft law sets a threshold of EUR 50 000; (iii) the value of the 
debtors ’ movable and immovable property did not exceed EUR 270 000, whereas  the draft law sets 
a threshold of EUR 500 000; and (iv) the total value of deposits and other movable assets in 
Greece and abroad on 20 November 2013 must  not exceed EUR 15 000, whereas  the draft law 
sets a threshold of EUR 3 0 000. Law 4224/2013 was adopted following the expiration of the broad-
based moratorium on auctions  of primary residences  that was in force from September 2010 until 
the end of December 2013 (the ‘broad- based moratorium ’).  
 2.2 The ECB notes that the broad- based moratorium has had an adverse impact on the payment 
culture in Greece and was also one of the major impediment s to the effective working out and 
resolution  of the very high amount of non- performing loans (NPLs)  of Greek banks. If banks are 
deprived of efficient tools to work out NPLs in an effective manner  this could result in  unnecessar ily 
high levels of NPLs and private sector debt , which  in turn  have an adverse impact on financial 
stability . At the same time,  high levels of debt  also negatively affect household expenditure plans, 
contributing to dampening of demand for new credit and overall economic activity.  
 
2.3 Broad- based prohibitions on the auction of primary residences , which are not well-targeted at a 
relatively narrow group of vulnerable debtors in real need of protection, are not an appropriate 
means of tackling a high volume of distressed debt, as they create moral hazard and undermine 
future credit supply . It is likely that the  prohibitions contained  in the draft law will incentivize debtors 
                                                 
2  FEK A 228/31.12.2013.  
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3 that are not in real need of protection to stop meeting their obligations or reduce them significantly 
even if they ha ve the means to meet them in full . Banks which anticipate the negative impact  these 
prohibiti ons could have on the payment culture are likely to provide less credit and ask for higher 
interest rates , which would subsequently  undermine growth and job creation. As indicated, 
measures like a prohibition on auctions  should be carefully targeted at vulnerable households and 
accompanied by further effective safeguards to prevent strategic defaults  and avoid a negative 
impact on future credit gro wth. In the absence of the above conditions, the soundness of credit 
institutions may be adversely affected,  as impairments may remain sustained or even increase due 
to the lack of suffi cient incentives for repayment, thereby posing risks to financial stability with 
possible adverse spill over  effects on the economy.  
2.4  Moreover, this insufficiently targeted prohibition on auctions is also likely to be perceived as  unfair 
from a social perspective.  The tackling of the humanitarian crisis,  the stated purpose of the draft 
law, is something for which the ECB, like the Institutions, certainly  has understanding.  The 
development of a social safety net would be  a preferable solution for tackling this issue as it would 
be more effective and not trigger the abovementioned adverse effects . Prohibitions  on auctions , 
well-targeted at vulnerable households , could, under certai n conditions  limiting such adverse 
effects , be introduced in order to accompany the development of the social safety net.  Like the 
Institutions, th e ECB stands ready to offer constructive advice with a view to achiev ing these 
objectives . Also,  as indicated  in Section 3, other reforms, when successfully completed,  will 
contribute towards provid ing more solid ground in the relations between creditors and debtors.  
 
3. Impact of the draft law on effective debt resolution processes and financial stability  
3.1 As indicated, t he ECB notes that the draft law grants protection from the auction of primary 
residences to a very wide group of debtors who have  a net annual income of up to EUR 50 000 
and a total value of movable and immovable assets not exceeding EUR 500 000. Thus, in practical 
terms, the draft law materially  reinstat es the broad- based moratorium . The very broad scope of 
eligible debtors , which goes beyond the protection of vulnerable and low-income  debtors , may 
create moral hazard and could lead to strate gic default s, further undermining the payment culture 
and future credit growth, as explained above.  
3.2 The repeated extension of broad- based prohibitions  on auctions for primary residences  does not 
constitute a sustainable solution for addressing the high level of NPLs in the Greek financial sector . 
First, it minimises incentives for debtors to cooperate with creditors in restructuring NPLs  through 
efficient processes that take into account the debtor’s capacity to repay.  Second, the draft law 
could under mine the effectiveness of recent reforms that  have been implemented in Greece  with a 
view to enhanc ing corporate and personal debt resolution frameworks . Such recent reforms include 
notably t he establishment of a Government Council for the Management of Pr ivate Debt , the 
adoption of a code of conduct to regulate banks’ engagement with debtors, the establishment of an 
out-of-court debt restructuring framework to facilit ate the early rehabilitation of  viable firms that are 
suffering with debt,  and the adoption of definitions of a cooperative borrower and reasonable living 
expenses for use in debt workouts.   
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4 3.3 The effective workout and res olution  of NPLs is of the utmost importance for the economic 
recovery and has to be addressed by  a comprehensive strategy  and implementation plan that 
requires the coordinated efforts of various stakeholders3. Building further on the recent  reforms  
aimed at enhancing corporate and personal debt resolution frameworks , as explained above,  and 
the commitments underpinning the Master Financial Assistance Facility Agreement (MFFA) 
between the European Financial Stability Facility and the Hellenic Republic4, this strategy should 
focus on policies that can further contribute to sustainable debt resolution. These policies  includ e, 
inter alia, the modernisation of the personal and corporate insolvency framework, the further  
improvement of the functioning of the judicial system , the introduction of  debt counselling services 
and information campaigns , and the de velop ment of  a social safet y net for vulnerable home owners  
as a permanent solution.   
3.4 The ECB suggests that the  Greek  authorities carry out a thorough impact analysis of the possible 
effects of the draft law  including the solvency and liquidity position of affected creditors , as the 
measures included in the draft law could put a significant strain on them  and the stability of the 
Greek  financial sector as a whole5.  
3.5 The ECB notes that , in principle,  the draft law  does not seem consistent with the commitments of 
the Hellenic R epublic under pinning  the MFFA. As discussions on the path forward for the Hellenic 
Republic  are currently underway  between the Eurogroup and the Greek g overnment  with the 
support of the Institutions , a final evaluation of the draft law is expected to take place within th is 
process . The Institutions will contribute to this evaluation .   
 
 
Done at Frankfurt am Main, 10 April  2015.  
 
[signed]  
 
The President of the ECB  
Mario DRAGHI  
                                                 
3  See paragraph 2.4 of ECB opinion CON/2013/33 on mortgagor protection. All ECB opinions are published on the 
ECB’s website www.ecb.europa.eu.  
4   The Eurogroup agreement of  20 February 2015 includes the following commitment: ‘ The Greek authorities commit to 
refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would 
negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions. ’ 
5   See paragraphs 1.2 and 3.3 of ECB opinion CON/2014/ 59 on new general measures stemming from the Supreme 
Court’s decision on consumer loancontracts .