What does it take to compete in the eurozone where competition is more intense and size plays a role? Cutting down on costs, cleaning up the balance sheet, capitalizing on human resources and looking outward would undoubtedly help local banks adapt to the new environment, National Bank Governor Theodoros Karatzas said yesterday. Addressing a British Hellenic Chamber of Commerce luncheon yesterday, Karatzas said domestic banks need to get rid of old habits in order to prosper in the new and more competitive surroundings. «Greek banks need to contend with and overcome the traditional way of looking at things,» he said. Karatzas said one important element of this is reducing and rationalizing costs, a strategy in which bank employees need to be involved. National Bank is due to announce shortly its own measures to tackle this issue, which include a voluntary redundancy scheme. Similarly, other banks have indicated plans to trim costs this year as profits fall in the wake of sharply reduced trading income. However, with the sector focusing its attention on retail banking, cutting the headcount could prove a gargantuan task. Karatzas said a healthy portfolio is «an especially critical issue» for banks. In the rush to cater to the credit boom, local banks have given out a massive number of loans. Total credit expansion in February was a strong 15.3-percent rise. The absence of a credit bureau in Greece means banks have been unable to check on borrowers’ credit history, leaving many to wonder how healthy credit growth has been and how secure banks are against bad debts. Karatzas urged the sector to continue the housecleaning process which took off in recent years as «international experiences have shown that a healthy and secure financial system is a critical requirement for economic growth and stability.» Equally important, banks should seek to maximize their employees’ potential as new financial services require differentiation and specialization, he noted. New technology could help reinforce personnel skills. Karatzas also advocated an outward-looking perspective for banks, essential in view of globalization and Greece’s proximity to the Balkans. «Greek banks could serve as the principal catalyst for the expansion of Greek companies into the region,» he said. He also listed the advantages of mergers which could boost capital and lead to economies of scale, despite National Bank’s own failed attempt with Alpha Bank early this year.