Legal usury

The sea of commercials advertising credit cards and consumer loans speaks volumes about the state of Greece’s banking system. Despite severe market competition, the oligopoly in that domain remains intact. Banks are eager to increase their market share, but they are unwilling to sacrifice their highly profitable privileges, which in fact border on profiteering. Harsh as this summary may sound, it is very close to reality. Profit margins in the sector are by far the highest in Greece’s economy and among the highest in the eurozone. To be sure, they are not the product of smart investing. Greece’s banking system is nowhere near being a lever for economic growth. In fact, its performance is extremely disappointing in that respect. Especially as regards the funding of small and medium-sized companies, banks pay little heed to balance sheets or pioneering ideas – what should be considered a sign of a firm’s business prospects. Instead they cling to their traditional, one-dimensional mentality by insisting on collateral to minimize risk. That also explains the minor role this type of financing has in their operations. The banks’ primary aim is to drain depositors and borrowers of their money. Their source of profit is twofold. One is the large number and wide range of commissions; the other is the big discrepancy between the deposit and lending rates, which is almost double the EU average. Consumers are overwhelmed with ads for credit cards and consumer loans for one simple reason: Interest on credit is five times that on deposits. They are essentially making profit from usury; a practice that is putting an extra burden on the already strained lower-income groups. If we consider that an increasing number of households are resorting to loans to cover outstanding consumer needs, it becomes clear that the problem has assumed a troubling social dimension. The government must address the issue of commissions and the unacceptably high lending rate. Any initiative should come from the banking system. If not, the Competition Commission must examine the causes that have enabled profiteering to thrive. This is especially so given that the contribution of banks to growth is meager in contrast to the lavish rhetoric of bankers.