Fitch Greek banks report

NEW YORK – Fitch Ratings, the international rating agency, says Greek banks have benefited substantially from deregulation and the industry’s consolidation, although there remains room for further improvements in cost efficiency. In a special report issued yesterday, titled «Greek Banking System & Prudential Regulations,» Fitch says liberalization has markedly improved Greek banks’ earnings prospects. «The removal of credit controls and capital account restrictions has enabled banks to extend credit at freely negotiable interest rates and to all sectors of the economy, eventually resulting in higher private sector borrowing,» says Matthew Hegarty, Director of Fitch’s Financial Institution group. With very rapid credit expansion in the last four years, Fitch notes that Greek banks have increased their exposure to Greek consumers, who are relatively new to taking on debt, and to more volatile Southeastern European markets. However, Greek banks are improving management of these risks by building up default data. While their credit losses have proved satisfactory to date and the regulator’s approach to new financial products appears to be sound, Fitch notes that much of the banks’ portfolio has not been tested in an economic downturn. Transparency and corporate governance are improving but remain weaker than in most Western European countries. The Greek banking sector is now dominated by six major banking groups, which have a combined market share of around 75 percent at end-2004. While the state still has some influence in the banking industry, it is declining. The report, which describes trends in Greek banking as well as recent developments in Greece’s regulatory environment, can be found on the agency’s website