Bill promotes bank deals, transparency as well as competition

Greek banks are studying a draft bill which includes provisions designed to promote competition and transparency in their sector. The legislative initiative primarily aims at the banking system’s adaptation to the new Revised International Capital Framework, better known as the Basel II Accord, which came into force on January 1. The provisions designed to foster competition and transparency come at a time of intensive deliberations among banks for further partnerships and business deals, including acquisitions. The most important of these provisions mandates notification to the Bank of Greece of any intention to acquire or reduce stakes by more than 5 percent of the share capital or voting rights previously held in a banking institution. The holders of stakes in banking institutions are obliged «to notify the Bank of Greece of any increase in their interest which exceeds 5 percent of the share capital already held in a banking institution. This obligation applies until the total interest reaches the level of 33 percent,» says the draft document. To date, shareholders were obliged to report the acquisition of stakes of more than 10 percent of share capital already held. Another measure considered to promote transparency is the facilitation of banks to cover share capital increases not only in cash but also in terms of other assets. «Regarding increases in already operating credit institutions’ own capital, the Bank of Greece can determine special terms concerning the gathering of capital,» the document said. This is seen as further facilitating partnerships and acquisitions in the banking system and reflecting the government’s intention to create the conditions for the creation of strong banking schemes, in view of the higher capital requirements which the adaptation to the Basel II Accord will necessitate. The intensive recent discussions and deliberations involving Piraeus Bank, Marfin Popular Bank, the Dubai Financial Group and the Bank of Cyprus are seen precisely in such a light – as leading to the creation of bigger groups in the sector. Economy Ministry officials seem to believe that the enhancing of the central bank’s powers through the reduction to 5 percent of share capital increments does not constitute a hurdle to the attainment of the above goal, as the strengthening of competition can be achieved by means of promoting transparency. The draft bill provides for fines of up to 10 percent of the value of shares involved if banks fail to report the aforementioned acquisitions in share capital.

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