EN ECB -PUBLIC  
 
OPINION OF THE EUROPEAN CENTRAL BANK  
of 29 July  2021  
on deferred tax assets of Greek credit institutions  
(CON/20 21/25) 
 
Introduction and legal basis  
On 22 July 2021  the European Central Bank (ECB) received a request from the Greek Ministry of Finance 
for an opinion on certain draft amendments (hereinafter the ‘draft amendments’) to Article 27 of the Greek 
Tax Code (law 4172/2013)1 on the carry -forward of losses and deferred tax  assets (DTAs) arising from 
debit differences . 
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/EC2, as 
the draft  amendments relate to rules applicable to financial institutions insofar as they materially influence 
the stability of financial institutions and markets , and to the tasks conferred upon the ECB pursuant to 
Articles 127(6) and 128 of the Treaty . 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. Purpose of the draft amendments  
1.1 As exp lained in the consultation letter, the draft amendment s aim to remov e any tax impediments to 
a potential acceleration of Greek banks’ non-performing exposures ( NPE) reduction plans and to 
facilitat e their participation in the recently adopted prolongation of the Hercules Asset Protection 
Scheme (HAPS II).  The draft amendments are also deemed necessary in order to mitigate any 
repercussions from the deleveraging of the Greek banking system.  
1.2 The Greek  Tax Code currently allows credit institutions to deduct from their gross tax revenue, and 
thus amortise:  
(i) the debit difference3 resulting from the exchange of Greek sovereign- issued or -guaranteed 
bonds in the context of a sovereign debt restructuring scheme. This difference may be 
deducted in 30 equal annual instalments, starting in  the financial year in which the securities 
were exchanged;  and  
 
1  GG I/167.  
2 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). 
3  In this case , the debit difference is the difference between the nominal value of the securities issued in exchange for  
the initial securities , and the acquisition cost of the initial securities. If a loss was incurred after the acquisition of the 
initial securities due to their impairment and that impairment was not offset against a reserve the initial acquisition cost 
must be taken into account.  
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2 (ii) the debit difference4 due to credit risk resulting from (a) the write- off or restructuring of debt5, 
or (b) the transfer, that is the sale or securitisation, of loans6 or their transfer to a financing or 
credit institution or other firm or legal person, provided they are managed by a credit institution 
in accordance with the provisions of Law 4261/2014 (GG I/107) or a firm that manages claims 
from loans and credits as referred to in Law 4354/2015.  This debit difference may currently be 
deducted from their gross revenue in 20 equal annual instalments, starting in the fiscal year in 
which the respective debt was written off or the loan was transferred, irrespective of when the 
assets concerned were derecognised from an accounting perspective.  
The abovementioned 30-  and 20- year amortisation periods  are an exception to the general rule 
according to which losses recorded within a fiscal year may be carried forward and offset against 
profits over the following fi ve successive fiscal years.  
1.3 Any accounti ng write -offs of loans by credit institutions  relating to debt write -offs or loan transfers , as 
mentioned in paragraph 1.2(ii) , that have not been recorded by the end of the fiscal year of the 
accounting write -off, will not affect the tax profit or loss for that year , until the occurrence of the events 
referred to in paragraph 1.2(ii) , at which point they wi ll be converted to debit differences.  
1.4 The law caps t he aggregate debit difference referred in paragraph 1.2(ii)  and the temporary 
difference referred to in paragraph 1.3 at the sum of the cumulative provisions and other credit risk -
related losses7 that have been recorded in the accounts up to 30 June 2015.  The amortisation of the 
aforementioned debit difference will be charged to the tax profit or loss results for the fiscal year 
concerned. If the credit institutions have set up, and deducted from their gross  tax revenue, an 
additional special provision for the debt written off or transferred, that provision wi ll be credited to the 
tax profit and loss results for the fiscal year in which the loan was written off or transferred and wi ll 
be reported as a taxable business profit.  
1.5 The draft amendments provide that debit differences related to sovereign debt restructuring losses 
(see the case outlined in paragraph 1.2(i) ) will amortise before debit differences  related to debt write-
offs or loan transfers  (see the case outlined in paragraph 1.2(ii) ). In addition, the draft amendments  
provide that t he amount of the annual amortisation of the debit differences  for a paragraph 1.2(ii) 
case wi ll be limited to the amount of profit calculated,  based on the provisions of the draft 
amendments , before th e paragraph 1.2(i i) debit differences we re deducted and after the debit 
difference of a paragraph 1.2(i) case  has been deducted.  
1.6 Furthermore, the draft amendments provide that t he remaining annual amortisation amount that was 
not offset wi ll be carried forward for  amortisation in subsequent fiscal years within the 20-year period 
referred to in paragraph 1.2(ii) , when there will be a residual tax profit following the annual 
amortisation of the debit differences referred to in paragraphs 1.2(i) and (ii) that corresponds  to those 
fiscal years. The draft amendments  also provide that , for the purpose of determining the amortisation 
 
4  In this case, the debit difference will be equal respectively either the total amount written off, less unregistered interest, 
which will not be registered,  or, where loans or credits are transferred, the amount of the loss.  
5  Debt written off or restructured i) under Article  61 of Law 4307/2014 (GG I/246); ii) under Law 3869/2010 (GG I/130); 
or iii) as a result of the definitive write -off of or an agreement  to restructure debt with debtors with outstanding loans.  
6  Under Law 4354/2015 (GG I/176) or Law 3156/2003 ( GG I/157) respectively.  
7  As referred to in Article 27A(2)(c) of the Greek Tax Code.  
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3 priority of debit differences carried forward,  older debit differences  will take precedence over newer 
ones .  
1.7 Lastly, the draft amendments provide t hat if at the end of the 20- year amortisation period balances  
remain that have not been offset, these balances will  constitute losses that wi ll be subject to the basic 
5-year carry -forward rule.  
1.8 It is proposed that t he draft amendments apply retroactively from 1 January 2021 to the debit 
differences referred to in paragraph 1.2(ii),  which have accrued on or after 1 January 2016.  In this 
regard, the consultation request letter states that the draft amendments  should be adopted before 
Greek credit institutions announce their interim financial statements for the first half of 2021 (interim 
statements are expected to be published in August) and their participation in HAPS II.  
 
2. Observations  on the draft amendments  
2.1 The ECB understands that the draft amendments propose to amend the currently linear 20- year 
amortisation period for debit differences generated by credit institutions due to losses arising from 
the write- off or restructuring of debt and/or the transfer  of loans , in three respects: firstly , to explicitly 
provide  for the amortisation of such deb it differences after the amortisation of differences resulting 
from losses incurred due to sovereign debt restructuring, and therefore over the later years of the 
amortisation period ; secondly , to allow the remaining annual deduction that was not offset to be 
carried forward for amortisation ( deduction)  in subsequent fiscal  years within the 20-year 
amortisation period if there is  a residual taxable profit following the annual deduction of the debit 
differences referred to in paragraphs 1.2(i) and (ii) that  corresponds  to those fiscal years ; and thirdly , 
to provide that if at the end of the 20- year amortisation period balances remain that have not been 
offset, these balances will constitute losses that will be subject to the basic five year carry -forward 
rule.  
2.2 The ECB notes that the reduction of NPE by Greek systemic credit institutions current ly remains  the 
principal  supervisory priority . In that respect, t he ECB understands that the objective of the draft 
amendments is  to facilitate the significant deleveraging initiatives undertaken by Greek credit 
institutions . The ECB also understands that the draft law does not amend Article 27A of the G reek 
Tax Code on the eligibility of DTAs for conversion  to deferred tax credits (DTCs) , a provision that is 
relevant to the requirements  of Article 39(2)  of Regulation (EU) No 575/2013 of the European 
Parliament and of the Council8. In this regard, the ECB reiterates its expectation that if in any 
circumstances a lack of profitability is observed, the DTAs are replaced with a direct claim on the 
Greek Gov ernment9.  
2.3 The ECB observes that the high percentage of DTCs in the CET1 ratios of Greek systemic credit 
institutions , for which no further reduction is envisaged in the medium- term,  remains a point of 
supervisory concern and notes in that respect that the draft amendment s will further delay the 
 
8  Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential 
requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 
27.6.2013, p. 1).  See also paragraph 2.1 of Opinion CON/2017/7, which refers to an expectation that amending 
provisions should not affect requirements of Article 39(2) of Regulation (EU) No 575/2013.  All ECB opinions are 
published on EUR -Lex. 
9  See paragraph 2.1 of Opinion CON/2017/7.  
ECB -PUBLIC  
4 derecognition of DTCs from the institutions’ balance sheets. The proposed new amortisation 
mechanism does not exclude the risk that in 20 years’ time the DTCs will not have been absorbed 
fully or partially. In th e same  vein,  the ECB invites more generally the consulting authority to review 
the Greek DTC framework in the short or medium  term in order to provide a more comprehensive 
and structural solution. T he consulting authority is also invited to consider the cli ff-off effect that the 
one-off write -off of outstanding unabsorbed DTCs could have on the capital positions of the banks .  
2.4 The ECB takes note of the proposed retroactive effect of the draft amendments  that are proposed to 
apply to debit differences which have accrued on or after 1 January 2016.  The ECB is of the view 
that the draft amendments should only apply to the amortisations of DTCs related to debit differences 
accruing on or after 1 January 2021,  so that amorti sations booked in the previous years are not 
reversed and the impact on the capital ratios  is only forward- looking . 
2.5 The ECB recommends that the consulting authority carefully assesses  the implications of the draft 
amendments for the risks stemming from the nexus between the Greek banking sector and the Greek 
sovereign , inter alia via its impact on sovereign contingent liabilities and debt sustainability10. It is 
also for the consulting authority to assess the implications of the draft amendments for the incentives 
of Greek banks to raise capital on the market.  
2.6 It is for the European Commission to assess the draft law’s compliance with Union state aid rules.  
 
This opinion will b e publis hed on EUR -Lex.  
 
 
Done at Frankfurt am Main, 29 July  2021.  
 
[signed]  
 
The President of the ECB  
Christine  LAGARDE  
 
10  See als o paragraph 2.3 of Opinion CON/2014/66, which refers to deferred tax assets in Portugal but is also applicable 
to Greece.