The country’s largest bank yesterday went on the defensive as it attempted to justify the latest round of interest rate cuts which have resulted in negative returns for many savers, even prompting the Finance Ministry to intervene into the issue. Greek banks embarked on a round of interest rate cuts of up to 50 basis points after the European Central Bank reduced its benchmark rate by half a percentage point to 2.75 percent on December 5. While the move was welcomed by businesses and borrowers, Greeks who had parked their savings in banks were understandably less than happy with the negative return, especially after taking into account above-average inflation. The Finance Ministry has urged banks to come up with savings products offering better yields, even threatening to introduce tax-free government bonds aimed at the retail market. It would be prudent to remember the two factors that determine interest rates, Theodoros Karatzas, governor of the National Bank of Greece, stressed yesterday. First, local banks are only following the European Central Bank’s lead. «Interest rates in the eurozone are not determined by the needs of the individual countries but by the general conditions in the region which are evaluated by the ECB,» he said. The ECB’s one-size-fits-all monetary policy means that some countries would benefit from its interest rate policy while others would lose out. The second important thing was that interest rates fluctuate depending on economic conditions. «The current low rates should not be a cause of despair for savers. They are not forever,» Karatzas said. He said banks face a number of conflicting demands. On the one hand, they have to secure high returns for their shareholders, while on the other they face customer demands for better interest rates. Looking ahead, Karatzas said National Bank aims to improve profitability and further cut operating costs. The bank will focus on boosting core profits rather than go after market share. One indication of the bank’s successful strategy has been the contribution of recurring profits to consolidated earnings, accounting for more than 95 percent of the total. Cutting operating costs, especially personnel expenses, is the other key plank of the bank’s strategy. «By the end of the year, we will have reduced total personnel by 1,700,» Karatzas said. He said overseas operations are also expected to drive future growth. Contributing 25 percent of total profits, the foreign units are forecast to lift their share to 35-40 percent in the near future. The bank has subsidiaries in Bulgaria, FYROM, Yugoslavia and the USA, as well as an office in Australia.