ECONOMY

Theodoros Karatzas dies; helped reform banking sector

National Bank of Greece Governor Theodoros Karatzas died yesterday at an Athens hospital following complications from stomach surgery. He was 73. «Theodoros Karatzas was the protagonist in National Bank’s restructuring and growth effort and he contributed greatly toward making the bank one of the top international banks. His contribution to the country’s economic affairs was decisive,» said Economy and Finance Minister Nikos Christodoulakis. As general secretary of the Economy Ministry and then deputy minister in the 1980s and head of Greece’s largest bank for the past eight years, Karatzas took an active part in the transformation of the Greek banking sector – from one dominated by state-owned banks often used to prop up government policies or provide cheap loans to the State and to a few favored businesspeople to a competitive and dynamic part of the economy. As an official at the Economy Ministry, Karatzas presided over a committee that recommended changes to the banking system. The changes allowed the banks to offer a new range of products, especially in the consumer credit field, a source of considerable income for the sector. As head of National Bank, one of Karatzas’s first moves was to turn all 1996 profits, some 60 billion drachmas, into provisions which allowed him to pay off longstanding debts accumulated over the years. He radically restructured the group, merging its three insurance companies into a single one, Ethniki Insurance, merging its two mortgage subsidiaries into the parent company in 1997, as well as subsidiary National Investment Bank for Industrial Development (NIBID) in 2002, and selling off the Macedonia Thrace Bank in 1998, thus starting a round of mergers and acquisitions that transformed the banking sector. Karatzas also succeeded in turning Greece into a strong regional force, with branches in all Balkan countries and also expanded business in Europe and the US. National Bank is now also listed on the New York Stock Exchange. Karatzas had always believed that the Greek market should have two, or at most three, large banking groups that would be able to face competition from European banks. But he failed to pull off what he envisaged as the crowning achievement of his career, a merger with Alpha Bank, the No. 2 bank in Greece and the largest privately owned one. This merger was announced at the end of 2000 and a logo for the new bank was even unveiled. However, opposition within both banks – National Bank unionists feared the impact of a merger with a private bank on their jobs, while Alpha Bank managers thought a merger with a state-controlled bank would create a bloated monster and would dilute Alpha’s culture – scuppered the deal in early 2001. In his efforts to modernize National Bank, Karatzas had the full support of Prime Minister Costas Simitis, a lifelong close friend under whom he had served at the Economy Ministry. Karatzas was Simitis’s first new appointment as prime minister to a major public company and was fiercely resisted by the more traditionalist Socialists and Simitis’s opponents within the ruling party. The episode, and Karatzas’s confirmation as governor of National Bank, was seen as a test of Simitis’s resolve to govern unfettered by a then still hostile party mechanism. Karatzas was to retire this spring, after the expiration of his final three-year term as governor. His eight years of stewardship have left the bank more prosperous and largely, but not completely, free of state control: Although the government has a mere 5 percent stake in the bank, it exercises a certain influence through the holdings of social security and pension funds. Karatzas’s successor, who will be picked after the election, will have to have the approval of the government. Theodoros Karatzas was born in Athens in 1930. He studied law at the universities of Athens and Strasbourg. He began his career as a lawyer in 1955 and in 1963 he became a legal consultant to the National Bank on maritime law. He also practiced privately. In 1982, a few months after the Socialists came to power, he became managing director of NIBID as well as chairman of Banque Nationale Franco-Hellenique. From 1985 to 1987, he served as general secretary at the Economy Ministry before his appointment as deputy minister of the economy. He resigned in late in 1988, disagreeing with the economic policies of the government and its entanglement in the so-called «Koskotas affair,» involving a rogue banker and businessman. His resignation put him at odds with supporters of then Prime Minister Andreas Papandreou. Karatzas resumed private practice and in 1992 became chairman of the private mortgage bank Aspis. He became governor of National Bank in February 1996, a month after Simitis succeeded Papandreou. Concurrently with his term as governor, he served as chairman of the Hellenic Banks’ Association.