1. Session II : Preserving financial stability:
1st Bank of Greece Workshop
on Economies of the Eastern European and Mediterranean Countries
The Global Financial Crisis and SEE: Lessons for macroeconomic policy and financial stability
Session II : Preserving financial stability:
the supervisors’ perspective
Charalampos Vogiatzis
Athens, 14 May 2010

2. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 2

3. Exploring the topic

4. The players and their interaction
Exploring the topic

5. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 5

6. Greek Banks in SEE & CEE. 6 UKRAINE ALPHA BANK PIRAEUS BANK EUROBANK
POLAND
EUROBANK
ROMANIA
NBG
EUROBANK
ALPHA BANK
PIRAEUS BANK
EMPORIKI BANK
ATE BANK
MARFIN EGNATIA
SERBIA
NBG
EUROBANK
ALPHA BANK
PIRAEUS BANK
ATE BANK
BULGARIA
NBG
EUROBANK
ALPHA BANK
PIRAEUS BANK
EMPORIKI BANK
FYR MACEDONIA
NBG
ALPHA BANK
ALBANIA
NBG
ALPHA BANK
PIRAEUS BANK
EMPORIKI BANK
TURKEY
NBG
EUROBANK 6

7. Total loans to customers in New Europe € 47.3 billion
Greek Banks in SEE & CEE.
At the end of 2009
24 banks
2.897 business units
employees
Total loans to customers in New Europe € 47.3 billion
Profits exceeding € 390 million

8. Greek Banks’ market shares
in host countries
Market Share
(% assets)
26,5%
29,0%
15,9%
16,3%
28,0%
4,6%
1,6%
2,1%
19,8%
6,4%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
Albania
Bulgaria
Romania
Serbia
FYROM
Turkey
Ukraine
Poland
Total New
Europe
Total SEE
SEE entities significant both for domestic markets and the Greek groups. 8

9. Meeting financing needs of local economies
Greek banking groups credit expansion in the region 3.8% during Q (total loans at end of Q € 49.1 billion) 9

10. Long standing commitments
Despite liquidity squeeze funding from parent institutions remained unchanged (€ 18 billion)
Increase of local deposits by 4.7% during Q without increasing deposit interest rates
Loans to deposits ratio improved but still high (163% at end of March 2010)
Funding to cross border entities is not considered as a liquidity source for parent institutions

11. Positive effects from IMF intervention Less foreign capital flows
Supervisory concerns
Economic conditions in Eastern Europe have been deteriorated since Q but in many cases things seem to be stabilised
Positive effects from IMF intervention
Less foreign capital flows
Depreciating local currencies and relevant implications for foreign currency denominated loans and equity participations 11

12. Implications of fiscal crises in home countries
Supervisory concerns
Reduction of import demand from the rest of Europe due to the crisis implications
Implications of fiscal crises in home countries
Asset quality deterioration on the back of the worsening operating environment
Slow down of credit expansion
Decreased operating income and profits 12

13. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 13

14. Active support of the European Bank Coordination Initiative.
BoG supervisory response
For entities in SEE….
Active support of the European Bank Coordination Initiative.
Encourage banks to keep their SEE subsidiaries well capitalized.
Monitoring of fundamental figures on a monthly basis.
Suggestions to promote further their risk management practices and internal control systems in the region. 14

15. Testing the resilience of the banking sector under IMF assumptions.
BoG supervisory response
….and for the Group
Pre-emptive action to increase the loss absorption capacity of Greek Banks (Tier I> 8%).
Testing the resilience of the banking sector under IMF assumptions.
Frequent on-site examinations (e.g. adequacy of loan provisions)
Close monitoring of Greek banks' liquidity positions and contingency funding policies. 15

16. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 16

17. Strong Home/Host co-operation before the crisis…. Bilateral MoUs
Governor’s Club meetings
SEE Multilateral MoU.
Joint Inspections
Exchange of findings reports 17

18. ….and in the aftermath of the crisis
Home host cooperation
….and in the aftermath of the crisis
Bilateral meeting of Governor’s and Heads of Banking Supervision with the participation of banks’ top management.
Speed up the settlement of Colleges of Supervisors
Arrange Joint Risk Assessment issues on an horizontal basis. 18

19. ….and in the aftermath of the crisis (2)
Home host cooperation
….and in the aftermath of the crisis (2)
Exchange of visits of home and host supervisors
Comprehensive communiqués
Immediate provision of information for urgent issues - teleconferences
Participation in EU programs 19

20. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 20

21. Addressing concerns for Greek fiscal crisis implications
Unlike other countries, the challenges facing the Greek commercial banks do not originate in the banking sector.
This is a fiscal crisis that have negative effects on the banking sector unless it is forcefully addressed in the coming months.
Greek commercial banks proved sound and resilient 21

22. Addressing concerns for Greek fiscal crisis implications
Credit risk higher but not accelerating
More conservative credit policies and higher provisions
Market risk exposure contained
Liquidity position under pressure but manageable thanks to ECB
Effective state support plan 22

23. Addressing concerns for Greek fiscal crisis implications
SE Europe more of an opportunity than a challenge. Greek eentities in the region well funded and capitalized to reduce contagion risk
Intensified on site examinations
Communication with top management and treasurers of banks almost on a daily basis 23

24. Addressing concerns for Greek fiscal crisis implications
Banks required to develop a new strategy for the new era
Involvement of Board of Directors
Exit plans
Increased frequency of reporting
Improve systems and controls 24

25. Addressing concerns for Greek fiscal crisis implications
Joined IMF-EC-ECB plan:
Credible plan of € 110 billion which addresses funding needs of Greece for the next crucial years
Political will to implement the strict austerity measures.
Stability fund with €10 billion available to further boost banks’ capital if needed
Regular reviews of the Greek banking system by experts of the three institutions

26. Addressing concerns for Greek fiscal crisis implications
In addition
ECB decision for the eligibility of Greek Government Bonds
Expansion of state plan by € 15 billion
ECB decision to intervene in public and private debt markets to ensure liquidity in financial segments that are dysfunctional.
EU package of € 500billion plus IMF contribution of billion

27. Preserving Financial Stability: The Supervisors' Perspective
Presentation
Supervisors, financial stability and the current crisis : exploring the topic
Greek banking groups: a crucial factor for the stability of the region
Bank of Greece Response as home and host supervisor
Cross-border Cooperation
Addressing concerns for Greek fiscal crisis implications
Conclusions 27

28. Dominique Strauss-Kahn
Conclusions
Europe needs a fundamental overhaul of its financial stability architecture that allows its citizens to enjoy the benefits of financial integration and protects them against the kind of twin fiscal-financial crises that are currently afflicting several member states. The reform of the supervisory and regulatory framework that is currently before the European Parliament is very important, but takes us only half the way. It needs to be matched by an integrated EU crisis management and resolution framework.
Dominique Strauss-Kahn
Brussels, March 2010 28

29. Thank you! Preserving Financial Stability:
The Supervisors' Perspective
Thank you!
Charalampos Vogiatzis
Deputy Director
Bank of Greece
Department for the Supervision
of Credit and Financial Institutions