Download Reasons for cross-border cooperation (1/2)

HELLENIC BANK ASSOCIATION
8TH INTERBALKAN FORUM OF BANKING ASSOCIATIONS
CROSS-BORDER SUPERVISORY COOPERATION
IN THE SE EUROPE REGION:
THE BANK OF GREECE’s EXPERIENCE
Panagiotis Kyriakopoulos
Director
Department for the Supervision
of Credit and Financial Institutions
CONTENTS
Brief overview of the Greek banking sector.
Reasons for cross-border cooperation.
Bank of Greece’s experience.
The Multilateral MoU.
Concluding remarks.
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Supervised Credit Institutions by the Bank of Greece
No.
Business Units
No.
Banks
No.
Employees
Minimum
Capital
Requirements
2005
2006
2005
2006
2005
2006
Commercial Banks
Domestic
21
21
3,035
3,265
53,029
54,998
€ 18 mil.
Special CI’s (1)
2
1
140
4
2,010
444
-
Foreign Branches
22
24
242
260
5,381
5,705
EU
18
20
236
253
5,203
5,527
-
Non - EU
4
4
6
7
178
178
€ 9 mil
Cooperative Banks
16
16
126
108
875
946
€ 6 mil.€ 18 mil.
Total Domestic
61
62
3,543
3,637
61,295
62,093
-
Commercial Banks
Abroad (2)
48
48
1,166
2,074
18,110
32,409
-
(1) In 2005 figures, Loans & Consignment Fund and Postal Saving Bank are included.
The latter, in 2006 figures is treated as a commercial bank.
(2) Including both branches and subsidiaries of Greek banks established abroad.
(up to 4 br.)
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3
Greek Banking System vs. Eurozone – 2006
Assets / GDP
Corporate Loans / GDP
298,0%
45,9%
37,8%
161,5%
Greece
Eurozone
Mortgage Loans / GDP
Greece
Eurozone
Consumer & Other Loans / GDP
38,1%
15,7%
26,9%
14,2%
Greece
Eurozone
Greece
Eurozone
41
4
Interest Rate Spreads (Gr – EuroArea)
4,5
4,5
4,0
3,5
3,5
3,0
2,5
2,5
2,18 2,0
1,5
1,00
1,5
1,0
0,5
0,5
Consumer Loans with agreed initial rate fixation for over 1 and up to 5 years
-0,05
0,0
Loans (up to €1 mil) to Non-Financial Corporations with agreed initial rate fixation for
up to 1 year
Housing Loans with agreed initial rate fixation for over 1 and up to 5 years
-0,5
-0,5
-0,56 -1,0
Consumer Loans with agreed initial rate fixation for up to 1 year
-1,5
-1,5
JAN 2003
ΑPR
JUL
OCT
JAN 2004
ΑPR
Source: Bank of Greece and ECB.
JUL
OCT
JAN 2005
ΑPR
JUL
OCT
JAN 2006
ΑPR
JUL
OCT
JAN 2007
ΑPR
JUL
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ROA & ROE (on a consolidated basis) - NPL
ROE after taxes and extraordinary items: 14.0% in 2006.
ROA after taxes and extraordinary items: 1.0% in 2006.
1,2
ROE (Greek Banks)
left hand
20
1,0
16
12
0,6
8
0,4
4
0,2
0
0,0
2002
2003
2004
2005
(%)
(%)
0,8
ROE (EU banks) left
hand
ROA (Greek banks)
right hand
ROA (EU banks)
right hand
2006
NPL (above 3 months without taking into account collateral): 5,1% in
the first semester of 2007 from 6,3% in 2005.
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6
Capital Adequacy ratio (on a consolidated basis)
Solvency ratio: 12.2% in 2006 (EU-27 banks: 11.8% in 2006).
Tier I solvency ratio: 9.9% (EU-27 banks: 8.0% in 2006).
%
Evolution of Solvency ratio of Greek commercial banks
14
13
12
11
13,2
12,8
12,2
11,9
12,4
11,9
11,5
11,3
11,0
11,8
12,2
11,8
10,9
10,5
9,7
10
10,0
9,9
8,9
9
8
7
2001
2002
2003
Solvency ratio - Greek banks
Tier I Solvency ratio - Greek banks
2004
2005
2006
Solvency ratio - EU banks
Tier I Solvency ratio - EU banks
THE IMPACT OF SUB-PRIME TURMOIL TO THE GREEK BANKING SECTOR
 Not direct exposure.
 Mainly an impact on the cost of funding.
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Reasons for cross-border cooperation (1/2)
 Especially for SEE: to promote efficiency and stability
of financial sectors in the region.
 Increasing
internationalization
of
SEE’s
banking
systems due to the:
- Increasing public confidence in the financial system.
- Liberalization of the provision of financial services.
- Privatization of many state-owned banks.
- Benign macroeconomic environment.
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GREEK BANKS’ PRESENCE IN SE / CE EUROPE
Market shares in terms of assets as of end 2006 (approx.)
UKRAINE 0.2%
EUROBANK 0.2%
POLAND 0.5%
EUROBANK 0.5%
ROMANIA 11.5%
NATIONAL 1.8%
EUROBANK 4.7%
SERBIA 20.0%
ALPHA 3.9%
NATIONAL 6.3%
PIRAEUS 0.9%
EUROBANK 5.4%
EMPORIKI 0.3%
ALPHA 3.2%
ATE BANK 0.2%
PIRAEUS 1.8%
EGNATIA 0.3%
ATE BANK 3.3%
BULGARIA 24.2%
NATIONAL 10.0%
FYROM 29.4%
EUROBANK 9.2%
NATIONAL 26.3%
ALPHA 1.0%
ALPHA 3.1%
PIRAEUS 3.7%
EMPORIKI 0.3%
ALBANIA 17.8%
NATIONAL 2.7%
ALPHA 5.6%
CYPRUS 9.4%
NATIONAL 1.7%
PIRAEUS 7.6%
ALPHA 6.8%
EMPORIKI 1.9%
PIRAEUS 0.1%
EMPORIKI 0.8%
TURKEY 3.5%
NATIONAL 3.3%
EUROBANK 0.2%
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Reasons for cross-border cooperation (2/2)
 The risks faced today do not end at national frontiers or even
at the EU.
 Trend for centralization of critical functions.
 EU policies (CEBS promotes cooperation and convergence of
supervisory practices, through guidelines, delegation of tasks
and responsibilities)
 Crises simulation exercises
supervisory authorities…
enhanced
preparedness
of
 …room for further improvement.
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BILATERAL MoUs
The Bank of Greece signed bilateral MoUs with countries were Greek
banks had significant presence that served the need to establish a
practical framework of cooperation at the early stages.
 Based on:
• Reciprocity / mutual trust & understanding.
• International guidelines & practices.
 Objectives:
• Set basic elements of home-host supervisory responsibilities;
• Facilitate on-going supervision under normal times through regular
information exchange; but…
• …no specific reference to financial stability, contingency plans &
crisis management.
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PRACTICAL EXPERIENCE
Overall positive experience
 Different starting points
 Gradual adoption of BIS
standards
 Orientation towards EU
membership
 Differences in regulation &
supervisory practices
 Share common objectives
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POTENTIAL CONSTRAINS
Potential areas of conflict and obstacles cannot change overnight, but
should be seen in a dynamic way and be resolved within an
evolutionary and flexible process.
In this context, several issues are emerging and need to be addressed:
 The lack of equivalent responsibilities of those provided for in Art
129 (model validation).
 Regarding subsidiaries, due to catching up process, there is a
growing need to evaluate risks from the home-country perspective.
 Public interest considerations.
 Identification of systemically important entities:
• Subsidiary may be insignificant for home but systemic for host
country.
• Flexibility rather than explicit quantitative criteria.
 Crisis management.
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MoU ON HIGH LEVEL PRINCIPLES OF COOPERATION AND CO-ORDINATION IN SE EUROPE
An effort to address some of the “obstacles”
Signed by the Governors of Central Banks of Albania, the Bulgaria,
Cyprus, Former Yugoslav Republic of Macedonia, Greece, Romania
and Serbia (July 2007) on the initiative of Mr. Nicholas Garganas,
Governor of the Bank of Greece.
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MoU’s KEY CHARACTERISTICS
 Compliant with the existing legal framework
• Jurisdiction of each Party;
 Set high level principles
• Avoid rigid application of detailed rules & procedures;
• Identify areas of concern & set principles of cooperation.
 Best practices oriented
• Explore the degree of participation of other countries.
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MoU’s OBJECTIVES
Structured cooperation to develop common culture.
Potential obstacles’ identification.
Information exchange.
Alleviate supervisory burden.
Allocation of tasks (on an evolutionary manner; reallocation
in the long run).
Addressing issues concerning financial stability and
enhance preparedness for managing cross-border crises.
Joint assessment of groups’ risk profile.
Combat AML/CFT acknowledging accentuated exposure of
cross-border banking groups.
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CONCLUDING REMARKS
 Convergence of supervisory practices should be regarded as the end
of a rather long-term process…
…but we should start by developing a common understanding.
 Not to wait for solving out the issues aroused but act proactively.
 Strike a balance between the market pressure to reduce the
supervisory burden and improve the efficiency of supervision with
the mandate to safeguard financial stability in the region.
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Thank you very much for your attention…
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