The government yesterday denied that it had played an unwitting role in Alpha Bank’s surprise decision to jack up lending rates and suggested that the Greek banking sector would benefit more by offering new investment products to investors. Alpha Bank, the second largest bank in assets, earlier this week unexpectedly announced interest rate increases in mortgage, personal and consumer loans, and credit card borrowing, justifying the move as a rationalization of its pricing policy. The bank, however, has come under heavy fire from the government, consumer organizations and businesses for going against the rate reduction trend set by the European Central Bank. It could even face multiple lawsuits should consumer organization EKPOIZO go ahead with its threat to mobilize disgruntled borrowers and help them take legal action. Piraeus Bank Governor Michalis Sallas on Thursday defended Alpha, saying that upcoming issues of tax-free popular savings bonds by the State and higher loan provisions ordered by the Bank of Greece called for a readjustment of interest rates. «This [charge] is ridiculous,» Economy and Finance Minister Nikos Christodoulakis said yesterday. «One has nothing to do with the other.» The State plans to offer one-year, tax-free bonds with a total value of 2.5 billion euros to retail investors this year to help offset negative yields on bank deposits. Below-par returns have come about as savings rates decline and inflation goes up. The first issue of popular savings bonds with a 3.6 percent interest rate will be open for subscription on February 17. Two other offerings are tentatively scheduled for May and September. Christodoulakis suggested that the banking sector had better enhance its competitive edge by introducing new savings and investment products, which would at the same time boost the economy amid the current slew of uncertainties. Increasing the pressure on Alpha, the Competition Commission yesterday confirmed that it had asked the bank to explain the reasons for its rate increase within the next 20 days. Dimitris Tzouganatos, head of the regulatory watchdog, said a probe could be launched if other banks follow in Alpha’s footsteps. The National Confederation of Hellenic Commerce yesterday fired off a volley of shots at Alpha. With the bank controlling a significant market share, the decision [to jack up rates] «could be characterized as oligopolistic behavior and taking advantage of a dominant position,» it said. The rate hike could also jeopardize companies’ competitiveness. The storm over Alpha in the meantime has discouraged other banks from following suit. Some banks have indicated that any rate reduction would only come in tandem with an ECB move. Analysts said a reduction looks likely in the second quarter of the year.