ECONOMY

Banks shortchange customers

Greek consumers’ transactions with banks cost them around 4 billion euros annually, with most costs hitting savings account holders. A large part of this cost comes from the negative return on savings accounts, most of which carry very low interest rates, if any at all, and another from the commissions imposed by banks for almost every transaction, from deposits to loans. The banks’ view is that every service has a cost and it is better that this cost be imposed on the recipient of the service rather than shared by all clients in the form of higher loan interest rates or lower savings account interest rates. However, Greek consumers are burdened by a higher spread between loan and savings rates than other Europeans; in fact, the spreads of Greek banks are almost double the eurozone average. In simple terms, this means savings have lower returns, credit is more expensive to get and banks enjoy greater profits. But by far the greatest loss comes from the impact of inflation, which averages 3.3 percent in Greece (versus 2.5 percent in the eurozone), while deposit and savings rates average 0.90 percent. This means an actual negative return of 2.4 percent, equal to 3.5-3.7 billion euros in depreciated money. In fact, many depositors face the prospect of paying the banks, instead of getting a return on their savings. Deposit accounts with a balance of less than 1,000 euros do not earn interest and, on accounts with a balance of less than 300 euros, banks impose fees of up to 10 euros per half-year. According to banks, these accounts represent only 3-5 percent of the total. Still, they correspond to unpaid interest of some 50 million euros per year. Specifically, these accounts contain about 5 billion euros, while the total of savings account balances is 78 billion euros. Total deposits (in deposit, savings and time accounts as well as repos) exceed 150 billion euros. For every transaction at the counter, the client pays a fee. A simple money transfer or payment of a credit card bill incurs a fee of up to 1.50 euros. A fee is also imposed when we withdraw money or ask for our account balance from an ATM of a bank other than our own, through the interbank payments system DIAS. A standing order for payment of utilities bills also incurs a fee (30-80 cents per transaction). Even e-banking transactions have their fees: A money transfer to another bank is billed at 1.50 euros. To these charges, one must add credit card subscription fees and loan «approval and withdrawal costs.» Just one of the big banks received fees of 85 million from transactions at the counter in 2005. This is still down on its 2004 earnings because several of its clients have switched to automated transactions through ATMs and e-banking. Another big retail bank earned last year 56 million euros from credit card fees and 40 million from transactions at its counters. A study of the «big six» banks (National, Alpha, Emporiki, EFG Eurobank, ATEbank and Piraeus) allows us to estimate total commission earnings at 250 million euros. Fees from the sale of mutual funds and shares, as well as approval of loans and credit cards add another 450 million euros.