Banking System of Greece

Transformation" is often used when discussing the Greek banking system. Greek banks currently represent one of the most sophisticated and modern sectors of the Greek economy. Greece's entry to the Eurozone, leading to deregulation in banking and finance, essentially paved the way for a "new" sector. What helped the transformation of the banking sector was a change in consumer attitude and behavior, motivated by dramatically falling interest rates over the last four to five years.

There followed a surge in all types of consumer credit and mortgage lending that has fuelled banks’ growth until today.

Although credit expansion is slowing, it is nonetheless maintaining its double-digit growth. For example, consumer credit increased at half the rate in 2002 compared with that in 2001 (33.1% vs. 62.7%); while mortgage lending increased at a similar rate in both 2002 and 2001 (35.6% vs. 38.9%). This trend is expected to last over the next two to three years, especially since consumer credit became completely deregulated in June of 2003, with the Central Bank’s decision to lift caps on personal and consumer loans.

Lending to small- and medium-size enterprises is another area of activity in which banks have focused on and this is expected to continue. In rankings, key players continue to hold their established positions, with National Bank leading in the sector overall, Alpha Bank maintaining first position among private banks, and Eurobank coming in third overall.

Position four is held by the former Commercial Bank, which revamped and re-branded itself into Emporiki Bank. Piraeus Bank continues to hold fifth place among the key players and this year was named “Bank of the Year” by Banker magazine for its financial performance, its strategic partnerships, and its ability to merge its acquisitions successfully.

Of the state-owned banks that were due for privatization, Agricultural Bank and General Bank have remained status quo, while talks of selling off part of the Postal Savings Bank are again in the media limelight.

The new governor of Athens-quoted National Bank of Greece, Takis Arapoglou, said that he planned to focus on retail business while retaining the bank's leading presence in the market. The government recently raised ? 490 million from the sale of an 11% stake in National Bank of Greece.

The sector's current status is the result of a number of mergers and acquisitions since the late 1990s. And the new environment has attracted a large number of foreign banks into the dynamic sector. There are more than 3,000 bank branches throughout the country, with an average of just more than 3,000 residents per branch, higher than the EU average, signalling the potential for more consolidation. Currently, there are just more than 20 domestic banks and about the same number of foreign offices, 15 cooperative banks, and two credit institutions, the Postal Savings Bank and the Deposits and Loan Foundation.

A number of new banks have opened in recent years, primarily focusing on retail banking. Institutions such as NovaBank, Omega, and Pro Bank are taking advantage of new products and services that were not available in the Greek market just a decade ago.

The government has indicated its desire to further