ECONOMY

Banks wary of another watchdog

Banks are concerned about the government’s insistence on strengthening the state’s presence in the local credit system.

Lenders are trying to understand why the government is mulling the creation of a new National Monitoring Mechanism at a time when the domestic banking system is under the watchful eye of the European Central Bank’s Single Supervisory Mechanism (SSM).

Senior bank officials told Kathimerini that it remains unclear what the government’s intention is from what it has said to date. There is a flow of contradictory messages via statements that on the one hand are in favor of extensive changes and the strengthening of the state’s presence in banks while on the other there is talk of the need to respect the terms of the banking market, private shareholders and corporate governance rules. Plans for a National Monitoring Mechanism would also bring into question the role of institutions such as the Bank of Greece, which besides its great experience and history is also an ECB member.

Local lenders have not only been monitored by the ECB since November, but the Greek state and the European Commission are also directly involved with the running of the four systemic banks, which account for 98 percent of the local sector. Banks are required to submit a host of data to Frankfurt on the entire range of their activities. Greek banks are monitored on a daily basis by the ECB as they receive extra cash from the emergency liquidity assistance (ELA) mechanism and are disproportionately reliant on Eurosystem liquidity.

Besides the ECB, local banks also have to be compliant with the Hellenic Financial Stability Fund (HFSF), which is fully updated and at times approves administrative decisions, while monitoring trustees send regular monthly reports to the European Commission due to the obligations banks have because they receive state support.