Banks will face high costs soon

Several Greek banks will have to increase their equity capital if they want to comply with the capital adequacy rules of the second Basel Agreement, Bank of Greece Governor Nicholas Garganas warned yesterday. The new rules will come into force in three years’ time, but financial institutions are already preparing for them. European banks must also adapt their operations to comply with the requirements of International Accounting Standards, which will become mandatory for the accounting statements for the financial year 2004. Large banks will spend between 100 and 200 million euros in order to comply with the Basel rules on risk assessment and credit management, Garganas said. The rules will also affect all companies, since they will tighten credit criteria. Banks will compete even more fiercely for both lower fee structures and higher performance. The end result will probably be a new round of mergers and takeovers.