National only in name

National Bank’s ambitious attempt to acquire Turkish bank Finansbank and the consequent big capital increase required to finance the acquisition has sparked a vigorous debate and concern over the «national character» of Greece’s biggest bank. The main concern is that pension funds, major shareholders in National Bank, will not be able to take part in such a large capital increase, thus diluting their stake and seeing foreign funds increase theirs, hence assuming control over the bank’s management. At present, about 40 percent of National Bank’s shares is held by foreign investors, 22 percent by Greek pension funds, 16 percent by other domestic companies and organizations and 22 percent by local individual investors. The main accusation against National Bank’s management, most often expressed by opposition Socialist politicians, is that it wants, through the capital increase, to privatize the bank and «shift decision-making,» that is, control over management, abroad. The concerns are not without merit. However, it is hypocritical for a party long in government to complain after they sold all direct state holdings to foreign institutional investors. They are voicing concern about something that no longer belongs to the state. Over the past three years, Greek governments have sold a 20 percent stake in National Bank shares and, thus, the state no longer owns a single share. It was a Socialist government, in the period when Nikos Christodoulakis was economy and finance minister, that sold 11.5 percent of the bank’s share to foreign investors, while, in November 2004, the current New Democracy government sold the state’s remaining 7.5 percent stake. The state continues to appoint the bank’s management, acting as custodian of the local funds’ 22 percent share. However, even now, a coalition of local and foreign investors could presumably appoint a management of its own choice, leaving the state out of the process. Certainly, this is more a fantasy than an imminent reality since no single foreign institutional investor holds more than 0.5 percent in National Bank and none wants to take over the management. Institutional investors simply seek companies with good profit prospects to invest in. If they are not satisfied with their investment, they simply sell and walk away, without being involved in management issues. It is a fact that, for almost a couple of months now, the National Bank management has been trying to ensure a quorum to approve the capital increase, so far without results. The remarkable thing about the Socialists is that they are touting National Bank’s «national character» after the event, when, as we have already said, the state does no longer own a single share and, consequently, can no longer do much to determine the bank’s fate, at least as a shareholder. As with most things in Greece, political parties’ strategic planning looks more like a case of «whichever way the wind blows» without the least provision for the future. The total lack of state planning and of a vision as to the development of the country and its financial system is disappointing and debates about the national character of National Bank can only be seen as a bad joke. The only «national» thing in National Bank is its name.