Opinion of the European Central Bank of 29 July 2021 on deferred tax assets of Greek credit institutions (CON/2021/25)
Date: 2021-07-29
Institutions: European Central Bank
Subjects: financial stability

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 29 July 2021  

on deferred tax assets of Greek credit institutions 

(CON/2021/25) 

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/EC 2, 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 explained in the consultation letter, the draft amendments aim to remove any tax impediments to 

a  potential  acceleration  of  Greek  banks’  non-performing  exposures  (NPE)  reduction  plans  and  to 

facilitate  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  

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2 

3  

GG I/167. 

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). 

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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(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 loans 6 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 five successive fiscal years. 

1.3  Any accounting 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 will be converted to debit differences. 

1.4  The  law  caps  the  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 will be credited to the 

tax profit and loss results for the fiscal year in which the loan was written off or transferred and will 

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 the amount of the annual amortisation of the debit differences for a paragraph 1.2(ii) 

case  will  be  limited  to  the  amount  of  profit  calculated,  based  on  the  provisions  of  the  draft 

amendments,  before  the  paragraph  1.2(ii)  debit  differences  were  deducted  and  after  the  debit 

difference of a paragraph 1.2(i) case has been deducted.  

1.6  Furthermore, the draft amendments provide that the remaining annual amortisation amount that was 

not offset will 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 

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6  
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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. 

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. 
Under Law 4354/2015 (GG I/176) or Law 3156/2003 (GG I/157) respectively. 

As referred to in Article 27A(2)(c) of the Greek Tax Code. 

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priority of debit differences carried forward, older debit differences will take precedence over newer 

ones.  

1.7 

Lastly, the draft amendments 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 

5-year carry-forward rule. 

1.8 

It  is  proposed  that  the  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 debit 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 currently remains the 

principal  supervisory  priority.  In  that  respect,  the  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 Greek 

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  Council 8.  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 Government9.  

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  amendments  will  further  delay  the 

8  

9  

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. 

See paragraph 2.1 of Opinion CON/2017/7. 

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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 the 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. The consulting authority is also invited to consider the cliff-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  amortisations  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 sustainability 10. 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 be published on EUR-Lex.  

Done at Frankfurt am Main, 29 July 2021. 

[signed] 

The President of the ECB 

Christine LAGARDE 

10  

See also paragraph 2.3 of Opinion CON/2014/66, which refers to deferred tax assets in Portugal but is also applicable 
to Greece. 

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