Without being marked by spectacular events, 2003 was a positive year for Greek banks. The main developments were relaxation in consumer credit limits and a return to higher profits, with prospects of even higher gains this year. Consumer credit Friday, June 20, 2003, was a milestone date in the history of Greece’s financial system. The deregulation of consumer credit became a reality and limits that had existed for decades were abolished, by a decision of the Bank of Greece. Each resident can now go to the bank of his or her choice and get a commercial or personal loan or a credit limit on his or her card without restrictive conditions and terms. Greek banks showed they had prepared well for the challenges of this new era. New products and services appeared, such as credit refinancing or, more simply, the ability to pool all liabilities, to several banks, under one account with one of them. The deregulation of consumer credit made it vitally important to accurately assess a prospective borrower’s creditworthiness. During 2003, banks placed great importance – and are expected to rely even more on during the following years – on the use of risk management systems and customer relationship systems (CRM) in order to more accurately evaluate their clients’ creditworthiness, and avoid the ill effects of a surge in bad loans. New technologies and the use of the abovementioned systems have enabled individual pricing in some cases, even for retail banking customers. For example, two customers of the same bank requesting a 20,000-euro commercial loan each will get a different interest rate according to each one’s transactions with the bank, their guarantees and their previous history of loan repayments. Prospects for credit growth in 2004 appear positive, since, according to the latest data, bank loans to households equal 24 percent of the country’s gross domestic product (GDP) versus 50 percent in the eurozone and over 70 percent in the United States. According to National Bank estimates, the rate of growth of consumer loans will be about 15 percent, versus 24.2 percent in 2002, and housing loans will expand 22 percent (versus 35.6 percent in 2003). Operations There were no developments of a significance equal to those of previous years in bank operations. Actions that marked 2003 were the successful sales of significant stakes to Greek and foreign institutional investors. National Bank sold an 11 percent stake previously belonging to the State; Alpha Bank sold 8.5 percent of its own shares and Piraeus Bank 6.7 percent. Deutsche Bank sold its 10 percent stake in EFG Eurobank Ergasias. Most big banks gave priority to the restructuring of their existing networks and the integration of prior mergers and acquisitions. It was not an easy task, since it was combined with reductions in operational costs and personnel cuts through voluntary retirement schemes. Banks spent large sums on alternative product distribution networks, with an emphasis on automatic teller machines (ATMs). There are more than 5,000 such cashpoints and some are to be found in shops, hospitals, companies, metro stations, gas stations and ships. This year, new-generation ATMs will appear, with the ability to read smart cards, the plastic money of the future, which will offer greater security and more applications. Thus, all banks that went through mergers and acquisitions find themselves with an integrated branch network at the beginning of 2004. New products Besides the deregulation in consumer loans, banks made an effort to present new investment deposit programs after deposit rates fell to very low levels when converging with rates across the eurozone. The most significant class of products offered by banks were investment deposit products with guaranteed capital. However, they failed to attract the interest of the mass of depositors. First of all, they were considered too complex for the average Greek depositor. Second, the requirement to tie down the capital for a certain period, up to five years in some cases, proved unattractive to smaller depositors who obviously face liquidity problems. Banks also targeted small and medium-sized enterprises and self-employed professionals by offering capital and financing for equipment and office space. These products are expected to provide good business throughout 2004. Profitability Developments on this front were positive in 2003. It is estimated that pretax profits will rise by 20 percent compared to 2002. The rise of the stock market, after three-and-a-half years of constant fall, and the banks’ emphasis on retail banking were the decisive factors. Last year also saw Greek banks developing networks abroad, especially in Balkan countries. National Bank, which has invested over 400 million dollars in the Balkans, is now the largest regional bank. It has also strengthened its presence in major financial centers, such as the USA and the UK. A quarter of its total profits stem from activities abroad and the bank wants to increase this to 35 percent. Overall, Greek banks are active in 20 countries, where they employ 12,000 people.