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Greek banks get tougher on governance, sustainability

As Piraeus Bank SA becomes the first Greek bank to sign the United Nations-backed Principles for Responsible Banking, Greek lenders are starting to place more emphasis on sustainability and governance issues.

Piraeus was one of 130 global banks that pledged to align their strategies with the Paris Agreement on Climate Change and the UN's sustainable development goals in New York on Sept. 22.

"We have an obligation not only to finance the Greek economy, but to finance the right parts of the Greek economy," said Eleni Vrettou, executive general manager, corporate and investment banking at Piraeus. Renewable energy is a key focus for the company, she said.

Vrettou was speaking at an event organised by the Hellenic Bank Association on the sidelines of the Sibos financial conference in London on Sept. 24.

It is hard to say at the moment which sectors the bank will rule out lending to, but Piraeus is very reluctant to lend to the defense industry, she said.

Governance issues

Also speaking at Sibos, National Bank of Greece SA's assistant general manager of corporate and investment banking, Vassilis Karamouzis, said his bank is working on a new methodology to assign a credit score to would-be borrowers based on their company governance.

Poor lending decisions by Greek banks in the years leading up to the global financial crisis meant that huge quantities of debt were extended to companies that had little hope of repaying. Speakers at the event stressed that borrowers and banks must be held to higher standards to avoid repeating the mistakes of the past.

Greece exited its international bailout in August 2018, but its banking system is still contending with high levels of nonperforming loans; its NPL ratio stood at 41.41% at the end of the first quarter.

Governance standards at Greek businesses, particularly small and medium-sized enterprises, are notoriously lax and urgently need to improve, according to Georgia Mourla, listing division director at Hellenic Exchanges - Athens Stock Exchange SA.

"There need to be sanctions and quick punishments for companies with poor governance," she said, adding that it will become increasingly difficult for companies with a poor track record in this regard to access finance.

But in a market where there is plenty of available capital, if not from banks then from private equity, this will not necessarily be the case, Karamouzis said.

"It's easy to be tough on borrowers' corporate governance standards when capital is scarce, less so when there is a lot of unallocated capital around," he said. "Lenders want to make a profit."

Regulators' role

Ioannis Emiris, executive general manager, private and investment banking at Alpha Bank AE, said that he wanted to see Greek regulators getting tougher on corporate governance.

"We need a regulator that is conducive to good corporate governance and that is prepared to safeguard standards," he said during the panel discussion.