Banks and State poised for clash

The government and the banking sector appear to be heading for a clash, as the former called on banks to show leniency to the indebted and open up their purses to small- and medium-sized enterprises (SMEs) while the latter pointed to a misconception regarding the role of the sector. Speaking at the Hellenic Bank Association’s annual general meeting yesterday, Economy and Finance Minister Nikos Christodoulakis called on banks to resolve outstanding cases involving debtors faced with hefty compound interest. «Disputes involving compound interest are holding up the system,» he said, urging the banking sector to settle the cases. He said the government has no plans to legislate on the subject. The previous economy minister, Yiannos Papantoniou, had pushed through two bills resolving outstanding cases despite opposition from banks. Christodoulakis also called on the financial industry to increase funding to SMEs, especially with capital set aside for industrial loans which has not been given out. Bankers estimated this source of funds at around 117 million euros (40 billion drachmas), and said they would need guidelines from the Bank of Greece before making any decision. The minister suggested that banks could help SMEs with real estate leaseback arrangements once theState has implemented the relevant tax framework. Banks could also play a bigger role in financing new economy activities and introduce contemporary investment products to their clients. Lastly, the sector could help Greece become a financial center for the region. Theodoros Karatzas, president of the union and governor of the National Bank of Greece, said a misperception on banks’ function led to a misunderstanding of their role. «It would be good to remember that banks today do not handle their capital, which is limited, but manage the people’s savings. They have a duty to safeguard these savings,» he pointed out. He said the sector differs from organizations that hand out loans and subsidies. Karatzas said the confusion between the two functions has contributed to the misconception of banks’ role. Looking ahead, he said that Greek banks face a number of challenges, one being the necessity of acquiring the characteristics of a European and even global organization and another the challenge of attaining critical mass. The sector’s ability to exploit technological advances and improve its human resources are equally important. «Let’s say he has a good chance,» Italian Finance Minister Giulio Tremonti told journalists on Saturday, on the sidelines of a summit of European Union leaders in Barcelona.