The Bank of Greece (BoG) has voiced strong opposition to proposals calling for an accelerated write-off of the banking sector’s deferred tax liability—a mechanism introduced after the 2012 Greek debt restructuring (PSI), which allowed banks to offset future profits against losses incurred from the haircut on Greek government bonds.
A Proposed Shift Starting in 2028
Under a recent proposal, banks would no longer be permitted to offset taxable profits against their deferred tax liability starting in 2028. Instead, they would be required to pay corporate income tax on their full taxable earnings—or face an extraordinary levy. The BoG warns that such a move raises serious concerns about implementation and could severely undermine financial stability.
Risk to Capital Buffers and Financial Stability
In its official statement, the central bank explains that significantly speeding up the write-off—beyond the legally defined schedule—would force banks to eliminate the remaining unamortized portion of the deferred tax liability from their balance sheets. This, in turn, would reduce their accounting equity and trigger substantial regulatory capital shortfalls, as banks would fall below required capital adequacy ratios.
“This would have serious implications for financial stability—specifically, for the protection of deposits and for banks’ ability to lend to the real economy,” the BoG stated.
Current Accelerated Amortisation Efforts
Since 2025, Greece’s four systemic banks have already adopted an accelerated amortisation of the deferred tax liability as part of broader efforts to strengthen the quality of their regulatory capital. As part of this process, they are also applying an additional supervisory adjustment—reducing their regulatory capital by an amount equal to 29% of the projected dividend distribution to shareholders.
Broad Economic and Investment Risks
The BoG further cautions that a sharp deterioration in banks’ financial metrics would negatively affect their investment appeal and impair their capacity to finance the wider economy. These effects would extend beyond the banking sector itself, potentially undermining legal certainty and damaging Greece’s overall investment climate.
The central bank also highlights the reputational risk posed by repeated public debate over the issue. “The restoration of confidence in Greece’s banking system since 2015 has been a major achievement—by successive governments, supervisors, and bank management. The soundness of the banking system remains a cornerstone of economic and financial stability,” it concluded.