State, consumers’ body cry foul over Alpha’s rate hike
Alpha Bank yesterday came under heavy criticism from the government and consumer organizations for its unexpected decision to jack up lending and mortgage interest rates. Unjustifiable, abusive and illegal were some of the harsh words used to characterize the one to two percentage point hike in interest rates in certain categories of loans, which come into effect February 17. Announcing the rate increase on Wednesday, Alpha Bank said the move was a rationalization of its pricing policy. Other banks are expected to follow its lead shortly. Alpha Bank’s surprise move was criticized as incomprehensible and unjustifiable by Deputy Finance Minister Giorgos Floridis. Greece’s strong economic growth, the pan-European trend toward rate cuts and cheaper funding costs for banks in the wake of December’s rate cut by the European Central Bank (ECB) mean there are no rational grounds for Alpha Bank to raise its lending costs, he said. «Such decisions on interest rate increases cannot be justified,» Floridis said. GSEE, the private sector trade union umbrella body, was blunter with its comments. It said Alpha Bank was «undermining the economy» and putting at risk borrowers who had taken out loans at low rates. It also urged the Bank of Greece to respond with relevant measures and other banks not to hop onto the bandwagon. Even more serious, Alpha Bank could find itself facing multiple lawsuits as EKPOIZO, the consumers’ association, mobilizes disgruntled borrowers to take legal action against the bank. EKPOIZO yesterday said it plans to organize unhappy borrowers and help them file class action lawsuits to recover their interest paid. EKPOIZO said applying the rate hike to loans and credit cards already taken out by consumers was «illegal and abusive.» It said a recent Supreme Court decision ruled that banks could not unilaterally increase interest rates. A recent Bank of Greece decree also stated that interest rate increases need to take into account the prevailing monetary conditions and the ECB’s rate, last trimmed on December 5. OTOE, the bank employees’ union, launched its own brickbats at Alpha Bank, calling it an «inexcusable move» in view of falling inflation, an expected rate reduction by the ECB later in the year and a larger-than-projected increase in last year’s national output. Piraeus Bank yesterday threw its support behind Alpha Bank and said it too plans to readjust its rates shortly. Michalis Sallas, Piraeus president, blamed the general money market conditions and the inflexible local institutional structure for the necessity to rationalize rates. «Taking into account the supervisory authority’s recent regulation and the government’s indirect intervention with issues of popular savings bonds, a re-evaluation of interest rates is essential,» he said.
