Greece’s agreement with its creditors, according to the memorandum it has signed, provides for the appointment of a commissioner in each bank slated for recapitalization, whose role will be to have complete control over policy so that lenders operate under a mandate set by the European Commission.
Commissioners will be appointed by a respected international auditing firm, to ensure their objectivity, and no one, including the government, will be able to intervene in their work, as they will answer only to Brussels. Sources say that all banks will be assigned a commissioner by the same firm that will undertake the project.
Within the jurisdiction of these powerful commissioners is also the authority to control the advertising expenses of credit groups. More importantly, however, they will also perform detailed inspections on lending issues, including loans to members of governing boards and their relatives. A specific limit on lending will be set for each bank, and this will be inviolable.
The memorandum clearly states that the commissioners will have full command on the administration of credit groups: “Every bank’s policy will have to clearly ensure that all of its clients are treated fairly, according to procedures based on credit risk and the credit capacity of each borrower,” the clause in the agreement says.
Any departure from this definition will obviously be forbidden, and the reaction of current bank management is anticipated with great interest.
Among the commissioners’ competencies will be monitoring the funding of state corporations, public companies and political parties, in an effort to emancipate the credit system from its political ties. Monitoring officials will issue quarterly reports sent directly to the European Central Bank, the European Commission and the International Monetary Fund.
Banks will “have to provide to the commissioners full access to their books, data, documents and every technical detail necessary for them to perform their duties,” the new bailout agreement states. “To meet this target, every bank will have to supply one or more offices in its headquarters so as to facilitate meetings upon a demand by the commissioners.”
Monitoring officials will have the power to interrupt the flow of loan issuing when deemed necessary, with the use of certain technical criteria. Banks’ deposits policy will also be in the spotlight, which means that the interest rate tactics will be examined in detail. The same applies to the banks’ subsidiaries.
After the imminent 26-billion-euro recapitalization process, salaries in banks will also have to be contained, in the general spirit of wage reduction, “just as has happened with the other European banks that have received state support,” the memorandum states. The policy for bonuses, meanwhile, will be dictated by long-term results.
For their part, shareholders should expect no coupons or dividends until the end of the program, and any thought of acquisitions or expansion policies will have to be postponed until much later.