Bank of Greece imposes a new set of rules on bank-client relationship

At a time when the domestic banking sector agonizes over diminishing profits, last week was marked by intense backstage action after the new Bank of Greece governor, Nicholas Garganas, decided to limit the various commission fees that banks charge for a range of products and services. According to the central banker’s thinking, it is through the interest rate that bank loans are priced. Therefore, every other additional fees ought to be disallowed. This provoked a string reaction by commercial bankers,who charged that this was a step backward to the era before the liberalization of the banking sector. Several sessions of intense haggling followed, culminating in a tense meeting between Garganas and the top commercial bankers on Thursday evening. The bankers insisted that the status of commissions be left unchanged, arguing that it will be solved by a European Union directive. Garganas, who had been placed on the spot by protesting consumers’ associations, did not back down on the essentials but somewhat modified his position. The compromise document, produced by Garganas on Friday in the form of a Governor’s Act, states that «collecting any sort of commission on any kind of banking loans» is forbidden, but goes on to list a series of exemptions, including a «management fee» on syndicated loans and an «inert capital fee» on portions of loans not taken by the debtor. Notary and other fees were exempted as well. Even this compromise has not satisfied the bankers, who can hardly hide their annoyance. «To attempt to regulate commission fees is a world first. Nowhere has anything like it been adopted,» says a top banker, who admits that Garganas was quite accommodating to their demands. The banks’ recent problems with falling profits are another cause for worry, the bankers, say, hinting that the new regulations will hurt business at a time when banks see again retail banking as their main income source. The Governor’s Act obliges banks to fully inform their clients on any transactions they make. For example, an agreement with a client to provide him, or her, with a floating loan rate must list the alternatives, including the base rate and all extra charges. The client must be clearly informed about changes in the loan rate, including the factors that might affect the rate, such as a decision by the European Central Bank to change its reference rate. Another important point of the Governor’s Act concerns buying consumer goods with a loan with the retailer acting as the middleman. The Bank of Greece reminds consumers that any agreement to pay for a good through a loan is, above all, a financial transaction, and that it ought to be signed at a bank branch, where an expert can spell out the details of the loan, rather than at the retailer’s premises. Until now, the client was presented with no choice regarding the bank that would finance the loan, the period of repayment and the extra charges incurred. Moreover, the retailers obtained access, through the banks’ automated Teiresias system, to the client’s personal data. «In the case of personal loans or credits related to the execution of reciprocal agreements on sales of goods or services by corporations which have entered into agreement with credit institutions, the conditions on the beginning of the borrowing period are clearly spelled out; any extra charges are also spelled out. The process of providing loans of credit must be concluded at the bank’s premises. The imposition of interest rate charge will in no case precede the cashing in of the loan,» the Governor’s Act specifies. Finally, the Bank of Greece demands from commercial banks to be regularly informed – at least once per annum – on clients’ complaints and mandates that banks must act on complaints within 45 days.

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