Enronitis is threatening to hit Greece’s banking sector
The scandals rocking Wall Street – namely Enron and Xerox – cannot be compared with those in Greece in terms of size. But there are many who are losing sleep over the prospect of International Accounting Standards being implemented in Greece from 2003. Bankers are prominent among them, not because of the risks of accounting tricks being revealed but because no one can rule out the appearance of requirements which to date have been masked over by accounting tricks. Commenting on the developments in the USA, a leading Greek banker said, «There is no doubt that such cases exist in the Greek stock market, albeit on a smaller scale.» He said the biggest danger is from those companies which «played» during the stock market boom, subsequently got into difficulty and are now on the borderline in terms of profits. He said the real problem is the clash of interests which came about due to the confusion between the role of management and investors. The growing use of stock options means that company executives are transformed into shareholders who care primarily about the share price and only secondarily about the company. In the USA, there are executives with yearly income of $500-600 million, a large part of which comes from share dividends from their stock options. Although lack of trust is the biggest problem, the market is changing and should find its balance soon. In Greece, there are many cases where managers are flourishing even as their companies are sinking. Some of these are being supported for fear that their failure could drag down the market. The problem of capital adequacy in the USA also appears to be troubling Greek banks. It could, therefore, not be a coincidence that the National Bank of Greece recently issued a 750-million-euro bond together with measures to cut costs and rationalize operations. Last week, it announced the absorption of its investment banking subsidiary into the group.
