Opinion of the European Central Bank of 22 May 2012 on debt arrangements for over-indebted individuals (CON/2012/40)
Date: 2012-05-22
Institutions: European Central Bank
Subjects: Greece, debt, debt reduction, financial stability, indebtedness, national law, natural person

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 May 2012 

on debt arrangements for over-indebted individuals 

(CON/2012/40) 

Introduction and legal basis 

On  19  April  2012,  the  European  Central  Bank  (ECB)  received  a  request  from  the  Greek  Ministry  of 

Labour  and  Social  Security  for  an  opinion  on  a  draft  law  on  debt  arrangements  for  over-indebted 

individuals (hereinafter the ‘draft law’). 

The ECB’s competence to deliver an opinion is based on Article 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/EC of 

29 June 1998  on  the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft 
legislative provisions1, as the draft law relates to rules applicable to financial institutions insofar 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.  

Purpose of the draft law 

1.1  The  draft  law  introduces  amendments  to  both:  (a)  Law  3869/20102  governing  the  procedures 

enabling  over-indebted  individuals  to  benefit  from  a  debt  arrangement  under  specific  conditions, 

and (b) the Code of Civil Procedure. The ECB was  previously consulted on Law 3869/2010 and 
issued Opinion CON/2010/34 on debt arrangements for over-indebted individuals3 in response.  

1.2  The draft law amends the conditions for applying to the competent court for a debt arrangement, by 

specifying  that:  (a)  debtors  may  reach  an  out-of-court  settlement  with  their  creditors  prior  to  or 

following  the  submission  of  their  application,  pending  final  judgment  by  the  competent  court  on 

such application; and (b) individuals regularly engaged in the conduct of commercial transactions 

will  also  be  eligible  for  a  debt  arrangement  subject  to  the  following  conditions:  (i)  they  are  self-

employed, (ii) they have not employed more than one employee over the four years prior to making 

the  application  and,  (iii)  their  debt  from  commercial  transactions  does  not  exceed  a  specific 

amount.  

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OJ L 189, 3.7.1998, p. 42.  
Law 3869/2010 on debt arrangements for over-indebted households and other provisions (FEK 130 A/3.8.2010). 
All ECB opinions are available on the ECB’s website www.ecb.europa.eu. 

 
 
 
 
                                                 
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1.3 

In addition, the draft law specifies further certain procedural issues in relation to the submission of 

applications  for  a  debt  arrangement  and  the  assessment  of  such  applications  by  the  courts.  More 

specifically,  it  provides  that  in  case  of  assignment  of  creditors’  claims  to  third  parties,  assignees 

with no main residence or seat in the Hellenic Republic are obliged to appoint an agent pursuant to 

the relevant provisions of the Code of Civil Procedure. This obligation is to apply retroactively. 

1.4  As regards debt arrangements for debtors whose assets are not sufficient to repay the debt, the draft 

law extends from four to five years the maximum period during which the debtor may be obliged to 

pay a specific amount to satisfy his creditors’ claims on a monthly basis. In such a case, where the 

debtor  fails  to  make  the  payments  imposed  on  him  by  the  court,  he  must,  within  six  years  from 

submission of his application or within one year from the court judgement, settle the outstanding 

amount plus the interest accruing from the date of such judgement. The applicable interest rate is 

2.5  percentage  points  higher  than  the  interest  rate  applicable  to  the  ECB’s  main  refinancing 

operations. This measure will also apply retroactively to pending applications. In exceptional cases, 

the court may limit the maximum arrangement period to three years. Due performance of the above 

obligations  by  the  debtor  will,  in  principle,  result  in  him  being  released  from  any  residual  debts 

towards all his creditors. 

1.5  As regards the special procedure aimed at protecting the debtor’s primary residence, the draft law 

allows for the extension of the maximum repayment period for the total debt from 20 to 35 years, 

in  certain  cases.  The  creditor  may  only  institute  enforcement  proceedings  with  respect  to  the 

debtor’s sole place of residence if the debtor fails to honour the obligations imposed during such 

repayment period, by being at least four monthly instalments in arrears. 

1.6  The draft law also reinforces the debtors’ duty of disclosure, stipulating that the consequences of 

infringing such duty will also apply where debtors deliberately omit creditors from their application 

for a debt arrangement.  

1.7  Finally, the draft law amends Article 982 of the Code of Civil Procedure in order to provide that 

debtor claims on deposits with credit institutions up to an amount of EUR 1 500 for personal bank 

accounts and EUR 2 000 for joint bank accounts shall be exempt from seizure. 

2. 

General observations 

2.1  The  ECB  understands  that  the  draft  law  aims  to  enhance  the  legal  framework  governing  debt 

arrangement  procedures  with  a  view  to  improving  its  effectiveness  and  ensuring  the  adequate 

fulfilment of its objectives. On the basis of the consultation request submitted to the ECB, the draft 

law aims to safeguard the interests of credit institutions and debtors, restoring trust between credit 

institutions and creditors and enhancing liquidity in the banking sector. However, in the absence of 

a  thorough  impact  assessment  of  the  proposed  changes,  it  remains  doubtful  whether  these 

objectives will be achieved. Such assessment should therefore be undertaken before the draft law is 

adopted. 

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2.2  The ECB notes that the amended provisions are of unlimited duration and general application and 

govern  existing  legal  relationships  between  debtors  and  creditors,  such  as  credit  institutions. 

Consequently,  the  observations  made  by  the  ECB  in  Opinion  CON/2010/34  still  apply  to  the 

proposed provisions. This is of importance given that the time which has elapsed since the adoption 

of the relevant legislation and the issuance of Opinion CON 2010/34 has seen changes to the Greek 

financial system, which should be taken into consideration prior to the adoption of the draft law. 

2.3 

It  seems  likely  that  several  of  the  amendments  may  have  negative  implications  for  credit 

institutions in their capacity as creditors and these provisions should be thoroughly assessed before 

the adoption of the draft law. In particular, such amendments may have a potential impact on both 

the  capital  adequacy  and  liquidity  position  of  credit  institutions  as  well  as  the  functioning  of  the 

financial system. It is only by making such a prior assessment that it may be possible to mitigate 

such  negative  implications.  In  turn,  this  will  safeguard  financial  stability,  promote  market 
efficiency and liquidity and support the adequate flow of credit to the economy4. From a financial 

stability perspective, potential concerns impacting on credit institutions, which need to be assessed 

from the outset, stem from the following provisions: (a) the proposed extension from 20 to 35 years 

of  the  maximum  repayment  period  for  debt  related  to  primary  residences,  (b)  the  proposed 

extension  of  the  debt  arrangement  regime  to  self-employed  persons  regularly  engaged  in  the 
conduct of commercial transactions, as described above5, (c) the exemption from seizure of certain 
deposits with credit institutions6, and (d) the removal of the current requirement to first pursue an 

out-of-court  settlement  procedure,  thereby  making  it  possible  to  immediately  file  for  a  court 

procedure and for the stay of enforcement procedures. 

2.4 

In  this  context,  the  ECB  stresses  that  the  proposed  amendments  should  be  accompanied  by  the 

necessary safeguards to avoid moral hazard, as it is  important that the debtor has an incentive to 

fulfil  the  payment  obligations  determined  by  the  court  settlement  procedure.  Against  this 

background,  the  proposed  interest  rate  to  be  applied  in  the  event  of  non-fulfilment  of  such 

obligations seems to be too low to serve as a penalty rate. In addition, no explanatory material on 

the  background  of  this  provision  has  been  provided  and  this  would  be  needed  in  order  for  a  full 

assessment to be made.  

2.5  The ECB welcomes the reinforcement of the debtors’ duty of disclosure and considers, in view of 

its  importance  for  the  stability  of  financial  institutions  and  markets,  that  the  draft  law  could  be 

further  elaborated  on  in  order  to  ensure  that  the  relevant  legal  framework  takes  into  account  the 

current needs of all stakeholders involved and will prove efficient in the long term. 

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5  
6  

See paragraph 2.2 of Opinion CON/2010/34. See also paragraph 2.3 of Opinion CON/2010/8 on restructuring of business 
and professional debts owed to credit institutions and on credit bureau data processing. 
See paragraph 1.2 above. 
See paragraph 1.7 above. 

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This opinion will be published on the ECB’s website.  

Done at Frankfurt am Main, 22 May 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

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