It seems like it was just yesterday that Greek banks, which carry some €89BN of bad loans on their balance sheets, passed the ECB’s latest confidence building exercise, known as the “stress test.”

In retrospect that may have been premature, because as Bloomberg reports, over 8 years after its first bailout Greece is finally considering a plan to help banks speed up their bad-loan disposals, potentially including a government guarantee, in a bid to restore confidence in the battered sector, people familiar with the matter said.

At its core, the Greek plan is the now familiar “bad bank” structure, in which banks get to spin off their NPLs into a separate, government-guaranteed SPV (although in the case of Greece, it is not clear if a government guarantee is all that valuable). The SPV would then be funded by selling bonds to the market.

While the details are still being worked out, an asset protection plan would see lenders unload some bad loans into special purpose vehicles, taking them off banks’ balance sheets. The SPVs would issue bonds, some guaranteed by the state, and sell them to investors, the people said, asking not to be named as the information isn’t public.

The move came after a furious selloff in Greek stocks, and especially banks, which was the culmination of a YTD plunge which has seen Greek banks lose more than 40% this year amid doubts they can clean up their balance sheets fast enough. The banks, which amusingly all cleared the ECB’s stress test earlier this year despite being saddled with tens of billions of NPLs, have been under mounting pressure from supervisors to cut their bad-debt holdings.

According to Bloomberg, the plan appears to have been borrowed from Italy, which conducted a similar exercise to stabilize its own banking sector.

One person said that it could reduce the load of bad loans in Greek banks by up to 15 billion euros ($17.2 billion) from an overall burden of 88.6 billion euros reported by the four systemic lenders as of the end of June.

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