National Bank of Greece (NBG) Chairman Takis Arapoglou said the new management will conduct a thorough assessment of subsidiaries and their value added to the group before adopting any decisions on restructuring. Arapoglou said all possibilities are open. The group may opt to promote the growth of some subsidiaries with a view to creating more synergies with the bank, or, conversely, it may decide to sell a number of them if their contribution to return on capital is seen as poor. The evaluation process may also lead to «intermediate» solutions, such as the long-term leasing of the Astir Palace Hotel in Vouliagmeni to a private company. It will be asked to acquire a minority stake so that it will have a serious interest in the proper running of the concern. The evaluation process is also seen as affecting large subsidiaries which have long operated largely independently of the parent bank, such as Ethniki General Insurance, or National Real Estate. The overall rationale of the new management is that NBG should not have to be restricted to selling only products and services (insurance, mutual funds) produced by its subsidiaries, but, in order not to lose customers and also earn additional commission income, it could sell those of other independent companies, like many international banks. The growth of the group in the Balkans will be pursued as planned; NBG is currently considering an expansion of its network of 15 branches in Serbia. NBG officials say they are aware of the fact that the bank’s latest impressive results are mainly due to the high growth rates in retail services – consumer loans and mortgages – but are concerned about the prospect of a mature market in two or three years’ time which will level off and not be as profitable. They argue that banks will be tempted to start absorbing their subsidiaries in order to stem their shrinking profits through realizing synergy gains. The crucial question is whether the appropriate legal framework will then be in place for such mergers. In the short term, NBG is set to place emphasis on the sector of small and medium-sized enterprises, where it is relatively lagging, and also acquire a more energetic presence in the funding of private financial initiatives of public projects and of large programs in the energy sector. Alogoskoufis The government takes particular interest in the restructuring of the banking sector but its further concentration is not currently on its agenda, Economy and Finance Minister Giorgos Alogoskoufis said. «No one can be in favor of the creation of banking giants… there must be a critical mass of banks to ensure competition,» he said. Analysts consider that moves toward further concentration will largely depend on government policy, particularly as regards social insurance and labor issues; banks are seen more likely to review their acquisition policy next year, alongside the application of International Accounting Standards.