It is an indisputable fact that the Greek banking system was relatively less surprised by the catastrophic pandemic as it has long faced the burdens and heavy legacy of the past. The pandemic, in this sense, met us while we were planning the rapid restart of the banking system.
I am not trying to downplay the scale of the problems, nor the possibility that some (especially non-performing loans) will get worse due to the health crisis. However, I support that Greek banks, through recent years’ adventure, have the necessary supplies to move effectively towards the future.
Everyone understands that the functioning of the economy, the return to sustainable growth, the priority in creating wealth and jobs in increasing incomes, presupposes, among other things, accelerating the consolidation and strengthening of banks’ balance sheets. The real economy needs banks with a low single-digit percentage of non-performing loans in total lending, it needs strong capital banks that will not rely on “artificial” forms of capital such as deferred taxation but will have sufficient “net” capital (both basic CEF 1 funds as well as additional-Tier 2) that will allow their dynamic participation in the credit expansion. Today, more than ever, we need strong banks to lead growth.
In order to carry out their mission effectively, they must strengthen their capital adequacy (either through internal capital creation or, if and where necessary, through share capital increases), accelerate the pace of their operational and digital transformation, and quickly adapt their business models in the demands and needs of the market but also of international competition, to harmonize their operating costs with the new reduced income figures and of course to consolidate their respective balance sheets, relieving them of the burdens of the past.
Flexibility, resilience, elimination of bureaucracy, digitization of all kinds of functions and widespread use of artificial intelligence, acceleration of decision-making must be a priority. To be at the core of their new strategy.
Banks’ managements have the responsibility to emphasize the needs of their customers, developing dynamic products and services and productively utilizing the liquidity generously provided by the ECB, supporting entrepreneurship, large infrastructure projects, the extroversion of Greek companies and development investments.
Make the most of the opportunities available to them to expand their sources of revenue and penetrate into profitable markets and new clientele to compensate for the loss of revenue as a result of leverage and shrink their balance sheets. A typical example is the wealthy individuals who invest and relocate to Greece, but also the family offices, the legal framework for which it is expected. They need to look far and wide beyond the effects of the pandemic and red loans’ heavy legacy, adopting new, more efficient ways of operating, faithfully implementing the reorganization and transformation initiatives they have taken.
Banks have developed capable antibodies that are now set to prove extremely useful. They have strategy and plan for the future, valuable experience from their relatively recent presence in the Balkans and SE Europe, satisfactory, organic and operational, resilience, which they have shown throughout the health crisis, trained and capable executives, European support, state encouragement and support.
They are ready for a total recall!
Mr. Ilias E. Xirouhakis is Deputy Chief Executive Officer at HFSF.