GREECE: An Introduction to Banking & Finance

Chambers 2022
Practice Overview 

Greece: Banking & Finance 

Macroeconomic Developments 

Although the ongoing COVID-19 pandemic has put and is still putting unprecedented pressure to the economies worldwide, surprisingly the significant downfall of the Greek economy by 9% in 2020 has turned to unexpected GDP growth during the first semester of 2021 (6.3%) as per data published by the Bank of Greece. This strong economic recovery has been achieved partially due to the increase of private consumption and partially due to the significant increase in exports of products and services with the opening of the world economy. The monetary and fiscal policies taken within the past year have led to a reduction of the exposure of the banking sector to non-performing loans by 37.8% compared to 2020 (as per Bank of Greece data). Further, the ECB’s Pandemic Emergency Purchase Programme (PEPP) helped banks and private entities accommodate pandemic losses under favorable terms and contributed to improved liquidity conditions in the internal market. However, the percentage of loans under adjustment remains high (40% of non-performing loans and 9% of performing loans) and it may pose risks to the stability of the Greek financial sector in the years to come.

Transaction Activity & Market Trends 

Despite the blurry economic environment due to the pandemic spread (at least during its initial phase), 2021 has been a year of significant deals for the Greek banking and financial sector. The four systemic banks have managed to mitigate their portfolio risk by concluding NPL and securitisation deals of up to EUR17.8 billion during the past year. Moreover, the lower interest rates during 2021 (4.3% lower rates than 2020) as well as the favorable terms offered by the Greek banking sector to new investment loans supported by the financial support programmes offered by the European Central Bank and the Hellenic Development Bank led to an increase in the conclusion of financial agreements. This positive outcome is expected to be maintained in 2022 within the context of the National Plan for Recovery and Sustainability aiming to co-fund (50%) investments through public revenues. Such initiative will mitigate the risk undertaken by credit institutions and promote the provision of favorable pricing policies to investment deals. As we are moving forward to a greener and more sustainable economy, investment opportunities arise at the field of green bonds issues, a scheme that will also be supported by the EU and is going to introduce novel financial instruments and securities in the economic field.

Green bonds 

In recent years the shift of capital flows towards more sustainable activities and the policy swing towards the green economy have become increasingly important. The target of environmental sustainability has been established at an international level. The European Union (EU) is currently implementing a new recovery instrument, i.e. the NextGenerationEU (NGEU) programme, to tackle the adverse economic consequences of the COVID-19 crisis. The issuance of green bonds (i.e. debt instruments destined to finance sustainable projects and low carbon transition, with a focus to reduce the environmental impact and deliver environmental benefits) under the NGEU programme is in line with the European Commission’s (EC) efforts to foster the green bond market, inspiring other issuers and providing investors with more green diversification options. With the transition to a more sustainable economy becoming increasingly entrenched in the EC’s agenda, the EC published in July 2021 a Regulation proposal creating the European Green Bond Standard (EUGBS), which is intended to work as a ‘gold standard’ for green bonds. The proposed framework introduces the key features for determining whether bonds are qualified as green and establishes the framework to facilitate sustainable investment in the pursuit of Europe’s ‘green’ development.

Following the example of other European countries, Greece aims at issuing its first green sovereign bond in the second half of 2022 with the ambition to significantly contribute in the global effort towards green transition. To that end and in order to promote domestic climate economy, it is expected that significant initiatives will be taken, including the incorporation of climate action in fiscal policy. In relation to the private sector, Greek banks are embracing the green principles, financing projects and activities in order to support green economy, while issuances of senior preferred green bonds have been already completed by Greek systemic banks. Further, the Athens Exchange (Athex) has already introduced the Athex ESG Index and 35 Greek listed companies have participated in the initial structure thereof. It is worth mentioning that Athex announced on January 2022 the launch of the special information hub “ATHEX BONDS GREENet” on its website.

HAPS Law 

The Hellenic Asset Protection Scheme (the “HAPS”, also known as “Hercules”) was approved by the European Commission in October 2019, for an initial duration of 18 months. As of April 2021, the European Commission gave its approval to the prolongation thereof, concerning a period of a further 18 months, i.e. from April 2021 to October 2022, the so-called “Hercules II”. With “Hercules II” the Greek government aims to reinforce Greek banks’ balance sheets and further reduce NPLs thereof, i.e. to reach a single-digit NPL ratio for all four Greek systemic banks, and thus converging with the European average NPL ratio by the end of the following year. Some of the main amendments can be summarized as follows: (i) the scope of application is expanded to include claims arising from financial leasing agreements granted by credit institutions; (ii) the 24-month grace period for the deferral of servicer remuneration and interest on the mezzanine notes may be extended up to six months. Particularly, under certain conditions that constitute emergency situations as per the provisions of HAPS law, the Minister of Finance may grant a six-month extension period upon joint request of the loans’ purchaser and the servicer. In particular, the following banks have submitted NPL portfolios to Hercules II: Eurobank for project Mexico (value of portfolio approximately €5 billion), Piraeus Bank for project Sunrise I, II (total value of portfolio approximately €9.8 billion) and Alpha Bank for project Cosmos (value of portfolio approximately €3.44 billion).

Microcredit and Microfinance Institutions 

Greek law 4701/2020 (“MC law”) established the framework for microcredit provision, i.e. the granting of credits up to €25,000 (without requiring collaterals), in the form of loans destined to finance either investment needs or working capital, financial leasing products for the acquisition of equipment, guarantees (which must not be used to obtain credit from other financial institutions) and credits destined to address unemployment or strengthen the integration of socially vulnerable groups. MC law introduced the notion of microfinance institutions, i.e. non-banking legal entities having their registered seat in Greece, which are licensed and supervised by the Bank of Greece. Their sole purpose shall be the provision of microcredit. Eligible beneficiaries of microcredit are very small-sized entities, self-employed individuals, individuals intending to proceed with the establishment of a small-sized entity, institutions of social and solidarity economy, individuals being part of socially vulnerable groups, as well as individuals wishing to cover expenses related to their education or post-education. Such beneficiaries may receive microcredit from more than one microcredit institution, provided that the aggregate amount of credits, regardless of the granting institution(s), does not exceed the amount of €25,000. In order to monitor the progress of the evolving individuals and businesses, MC law also stipulates the obligation of microcredit institutions to provide (either directly or through outsourcing) consulting services of business education and guidance to beneficiaries (including, inter alia, accounting and financial management, as well as legal and tax-related guidance).

Cryptocurrencies 

In Greece, cryptocurrencies’ legal nature is yet to be determined by a regulatory regime. However, Greek law 4557/2018, as amended by Greek law 4734/2020 in order to transpose the Fifth Anti-Money Laundering Directive (AML 5) provisions into Greek law, is now applicable to digital wallet providers and cryptocurrency exchanges. Further, by virtue of Hellenic Capital Market Commission (HCMC) decision no. 5/898/3.12.2020, a specific registry was established in which all digital wallet providers and cryptocurrency exchanges shall be registered in order to provide respective services in Greece or passport their services to other countries.