Moody’s, the credit rating agency, yesterday reiterated its stable rating outlook for Greek banks, citing the sector’s solid growth prospects and positive changes in recent years. However, it tempered its praise by pointing to the growing credit risks to Greek banks brought on by rapid credit growth in the last few years and the sector’s inability to control its spiralling costs. «The stable rating outlook for Greek banks is supported by the gradual banking system transformation that is leading to stronger institutions and good growth prospects for financial services in an unbanked market,» Constantinos Pittalis, vice president of Moody’s, wrote in the report. Backed by healthy interest margins, good business growth and new revenue sources, Greek banks are expected to «enjoy an adequate earning power» that should continue over the medium term, said Pittalis. Two areas of concern however stand out. «Greek banks have not been very successful in controlling their cost growth,» Moody’s said. Collective union agreements, strong labor unions and the sector’s limited ability to lay off staff without incurring high costs have kept personnel costs at high levels. Banks would do well to remember that «high operational efficiencies is a key competitive advantage,» especially when revenue growth is weak and competition intense, Moody’s pointed out. Another potential problem for the sector is the quality of its future assets and the appropriate risk management systems. Encouraged by eurozone interest rates, Greek credit expansion continues to grow by strong double-digit figures. «Success in the areas of risk management and competitiveness will distinguish the leaders from the followers in Greek banking over the medium term,» Moody’s said.