BoG: Credit by natural selection
Bank of Greece Governor Giorgos Provopoulos called on the country’s commercial lenders to stop funding moribund companies and focus on more robust corporations that can help the economy grow.
Addressing an event organized by the Hellenic Federation of Enterprises (SEV) on Wednesday, the central banker said: “The conditions of plentiful and often flexible bank funding cannot and should not be repeated. It would be pointless and dangerous to allow permanently weak, undercapitalized and overindebted enterprises to continue operating. New credit should be extended to dynamic enterprises with a highly export-oriented character and with growth prospects.”
Provopoulos further called on lenders to take initiatives for the restructuring of the country’s economy: “The banking system can constitute an important transition lever toward the new growth model that the economy is in need of.”
“Nowadays the credit sector may be the only part of the economy that has been fully restructured and recapitalized. The new banking system is now based on firmer ground. No other domain has seen restructuring on such a scale, or even close, even though the unprecedented conditions demanded it. This experience of banks may prove precious also for the enterprises in the other sectors and domains of our economy. Banks are therefore invited to contribute substantially to the effort to reorganize production,” said Provopoulos.
Likewise, Piraeus Bank head Michalis Sallas stressed that helping any non-competitive enterprises to survive undermines the interests of the economy. The president of the country’s biggest lender said that the efforts to restructure the economy cannot possibly be restricted only to state interventions, adding that the responsibility for the restructuring and modernization of the production base mainly lies with private initiatives.
The chief executive of Piraeus group subsidiary Geniki Bank, Nikolaos Karamouzis, echoed Sallas, saying that banks should gradually focus on the management of tomorrow and not on that of yesterday.
