BRUSSELS: Greece on Friday secured approval from EU competition regulators to extend its "Hercules" bad loan reduction scheme to help banks shed a mountain of impaired credit burdening their balance sheets.

The scheme was launched in October 2019 to help the country's banks offload up to 30 billion euros of bad loans by turning bundles of impaired credit into asset-backed securities that can be sold to investors.

Athens wants to prolong the scheme to October 2022.

The European Commission said its approval was on the basis that no state aid would be involved.

"I welcome the prolongation of the Hercules scheme, which has already been very successful in providing a market conform solution to remove non-performing loans from the balance sheets of Greek banks, without granting aid or distorting competition," European Competition Commissioner Margrethe Vestager said in a statement.

Last month the European Central Bank voiced its support for Greece's plan to extend the scheme.

"Given the success of this securitisation programme, we welcome the Greek authorities' stated intention to extend this scheme into 2022," Elizabeth McCaul, an ECB supervisory board member, told a conference on non-performing loans in Athens.

Deputy Finance Minister George Zavvos said that with Hercules-2 the government is determined to see a further reduction of bad loans to enable banks to fund the economy, businesses and households.

"After a long and tough period the banking system is turning a page and can look to the day after the pandemic with optimism," he said in a statement.

Hercules-2 aims at further shrinking banks' non-performing exposures (NPEs) by 30 to 32 billion euros, meaning a single-digit NPE ratio for the country's four big banks - National, Piraeus, Alpha and Eurobank - by 2022.

This will bring them closer to the average NPE ratio in Europe of 2.6%