Nonetheless, even when they do find the time,
they hesitate or in many cases downright refuse
to sign lending agreements, simply because they
are afraid. What are they afraid of? The possible
criminal sanctions they face in case the loan does
not “pan out”. As a result, hundreds —if not thou-
sands— of applications for new loans are cur-
rently pending, submitted by businesses that
urgently need liquidity either to make an invest-
ment or, simply, to stay afloat.
But with bankers refusing to approve the loans,
everything falls behind. And consequently the
country’s return to growth also falls behind.
Because it is well-known that without investment
there will be no increase in output, no new jobs
and no restoration of economic growth. And so,
the country is dragged deeper and deeper into a
vicious circle.
The second result of this anyhow paradoxical sit-
uation is that, in order to be fully covered, banks
are raising their bad debt provisions, given that
there is little else they can do. And this is how total
bad loan provisions broke the 100 billion euro
barrier, setting a new record for Greek standards
— and are still on the rise. The problem is that
when, instead of being turned into loans that
R
eportedly, the competent bank depart-
ments have received dozens of public
prosecutor orders for the opening of loan
files, as investigators probe into the terms of their
extension, as well as whether their non-perform-
ing status is “justified” by the borrowers’ —visible
and hidden— assets. Investigators have mainly
set their sights on loans extended to large enter-
prises and, in particular, on the financial status of
their principal shareholders.
Banks, and in particular the officers responsible
for handling the loans, are called to answer for the
terms of the loans, the follow-up process, as well
as the fact that these loans were refinanced
whenever need arose; most importantly, they are
called to prove that they had scrutinised the prin-
cipal shareholders’ assets, in order to determine
whether the failure to properly service the loans
was in good or in bad faith.
Bankers claim that in most of cases they are
essentially required to play detective in order to
discover hidden assets, a
de facto
formidable
task in today’s world of free capital movement.
Among others, they complain that their auditing
workload has become so huge that there is very
little time left to do actual banking work.
Trade with Greece
54
Greek banks:
at the crossroads
“Be stingy with loans.” This is currently the motto of
most Greek banks, systemic and other, not only as a
result of scarce liquidity, but also because of the fear
of criminal sanctions against bankers for loans
extended by their officers. This is an unprecedented
phenomenon
—
amidst a deep crisis, which has been
running for eight years now
—
with unknown, for the
time being, effects on the functioning of the Greek
market, or whatever is left of it.
By George Mandelas
