Update November 14, 2015

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Greeces tactless biggest bank now faces the music

Sumel Sarker


Greeces tactless biggest bank now faces the music

14 November 2015, Nirapad News: The long-serving chairman of Greece’s Piraeus Bank, Michalis Sallas, masterminded a series of acquisitions of collapsing lenders for nominal sums, according to a report in then international media.

His aim has been to make his own bank “too big to fail” in the event of a prolonged depression at a time when other Greek banks battened word, it said, quoting several Greek bankers.

Piraeus used to be a lifeline for small entrepreneurs in Greece, the report said.

A leading member of Greece’s wealthy oligarch class, Mr Sallas kept strong ties with successive governments and also holds influence over local media advertising policy, partly through lending to cash-strapped owners and also a high-spending but selective advertising policy, the report added.

He enjoyed a close personal relationship with George Provopoulos, central bank governor during the crisis, who was previously Piraeus chief executive.

Piraeus and its peers — National Bank of Greece, Eurobank and Alpha — rush now to meet a December 31 deadline for raising €14.4bn of fresh capital to shore up their balance-sheets and avert a possible bail-in of depositors, according to the report.

The latest European Central Bank (ECB) stress tests, the report added, have however laid bare some striking flaws in Mr Sallas’ strategy at the height of the Greek crisis.

As much as 57 per cent of Piraeus’s portfolio are troubled loans at the end of June compared with 42 per cent for Eurobank, the strongest Greek bank. Piraeus’s total capital requirement was €4.9bn, against Eurobank’s €2.1bn.

The report said, shoring up the finances of Piraeus, now Greece’s biggest banks and those of its peers, will be crucial in kick-starting lending to the country’s economy, helping it to climb out of a brutal recession that has shrunk the economy by almost a quarter since 2009.

The bank’s dire straits has revived debate about its earlier aggressive expansion strategy at the time of Greece’s-crisis, it observed.

A reluctance to pursue distressed borrowers is one reason why Piraeus is judged to be the most precarious among Greece’s four top lenders, according to the ECB’s latest health check of the sector

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