This country-specific Q&A provides an overview of the legal framework and key issues surrounding banking and finance law in Greece including national authorities, regulation, licenses, organisational requirements, supervision and assets.
This Q&A is part of the global guide to Banking & Finance.
For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/banking-finance/
What are the national authorities for banking regulation, supervision and resolution in the jurisdiction?
The Bank of Greece ('BoG') is the main competent national authority in respect to matters pertaining to banking regulation, supervision and resolution in Greece.
Further to the establishment of the European Single Supervisory Mechanism ('SSM') by virtue of Regulation 1024/2013 and Regulation 468/2014, the European Central Bank ('ECB') has been entrusted with the exercise of prudential supervision of the four (4) Greek systemic banks, i.e. Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank Ergasias, in close collaboration with the BoG.
The BoG retains direct competence for the prudential supervision of the remaining Greek banks, which are considered 'less significant' for the overall stability of the European banking system, in accordance with the provisions of Law 4261/2014. It also remains the competent regulatory authority over all Greek banks and credit institutions in respect of AML compliance and consumer protection issues.
Τhe Hellenic Capital Markets Commission ('HCMC') is the designated supervisory authority for investment services companies. Given that all Greek systemic banks are listed, the competence of the HCMC also extends thereon, as far as capital markets legislation is concerned (eg compliance with MiFID provisions).
Which type of activities trigger the requirement of a banking licence?
The requirement to hold a banking license is triggered when an institution undertakes the activity of taking deposits and other repayable funds, thus qualifying as a credit institution in accordance with the provisions of Law 4261/2014 and Directive 2013/36/EU.
Nevertheless, the following activities that are often also undertaken by credit institutions may also trigger a licensing requirement in Greece, subject to the recognition principle:
- Lending (including consumer credit, credit agreements relating to immovable property, factoring, financing of commercial transactions and forfeiting);
- Financial leasing;
- Payment services;
- Issuing and administering other means of payment (eg travellers' cheques and bankers' drafts);
- Guarantees and commitments.
- Trading for own account or for account of customers (eg in money market instruments, foreign exchange, financial futures and options, exchange and interest-rate instruments, transferable securities);
- Participation in securities issues and the provision of services relating to such issues;
- Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings;
- Money broking;
- Portfolio management and advice;
- Safekeeping and administration of securities;
- Credit reference services;
- Safe custody services; and
- Issuing electronic money.
Does the regulatory regime know different licenses for different banking services?
Yes. In principle, each of these services enumerated in Question 2 above triggers per se a licensing requirement. For example, the BoG may separately license payments institutions, leasing institutions and e-money institutions.
Furthermore, the BoG retains the right to specify additional criteria and prerequisites for the performance of specific banking activities.
Does a banking license automatically permit certain other activities, e.g., broker dealer activities, payment services, issuance of e-money?
Yes, it is possible for a credit institution to apply for and obtain a single license which, other than of accepting deposits and other repayable funds, allows it to perform one or more of the remaining services enumerated in Question 2 above.
In addition, the BoG may allow credit institutions to undertake supplemental or secondary banking activities, provided that all relevant risks are adequately hedged.
What is the general application process for bank licenses and what is the average timing?
In order to obtain an operations license, interested entities must ensure that they meet the applicable minimum capital requirements. In particular, depending on the type of legal entity applying for such license, the capital amount that must be paid-up as at the time of a license application is filed has as follows:
- For credit institutions: € 18million
- For branches of credit institutions licensed in a third country: € 9million
- For credit cooperatives licensed as credit institutions: € 6million
Interested entities must submit to the BoG a license application, certain questionnaires and the requisite supporting documentation (eg detailed three-year business plan and articles of association). The BoG, in collaboration with the competent EU authorities, assesses the merits of the application and may revert to the applicant for additional information, if necessary.
In any event, the BoG must revert with a decision on the license application within twelve (12) months as of the receipt of the application.
Is mere cross-border activity permissible? If yes, what are the requirements?
Yes. A credit institution of an EU member state may provide cross-border banking services in Greece provided that it has duly notified BoG in advance. Similar notification requirements apply for credit institutions having their registered seat in a third country.
What legal entities can operate as banks? What legal forms are generally used to operate as banks?
Credit institutions may be exclusively established and operate in Greece under any of the following forms:
- a Société Anonyme of Law 2190/1920 or
- a Credit Cooperative Institution of Law 1667/1986 or
- a European Company of Regulation 2157/2001 or
- a European Cooperative Society of Regulation 1435/2003
What are the organisational requirements for banks, including with respect to corporate governance?
Credit institutions must establish a rigorous corporate governance scheme. The board of directors determines, supervises and is held accountable for the implementation of corporate governance arrangements, ensuring the efficient and prudent management of the institution.
Depending on their significance in terms of size as well as range and complexity of activities undertaken, credit institutions may be under the obligation to establish internal governance committees, to assist the board of directors in discharging its above duties. Such committees include:
- the internal audit committee
- the risk management committee, entrusted with monitoring risk, liquidity and capital incentives,
- the remunerations committee, which scrutinizes the compensation paid to the board of directors and remuneration policies,
- the nominations committee, which recommends candidates for the board of directors, and
- other ad hoc committees (eg IT security).
Credit institutions must also adopt a corporate governance code and designate a special section in their website, in which they publish all information that is relevant to ensuring compliance with corporate governance obligations and remuneration policies.
Do any restrictions on remuneration policies apply?
Yes. In principle, the remuneration policies of credit institutions must comply with the principles of prudent and effective risk management; furthermore, such policies must be aligned with the business strategies, values and objectives of such credit institutions.
Many on the statutory restrictions on remuneration policies focus on the distinction between fixed and variable compensation. As a matter of principle, the variable component may not exceed 100% of the fixed component of such compensation. The ratio in question, may be increased to 200%, provided that such increase is approved by virtue of a special resolution of the general meeting of the credit institution.
Remuneration committees are responsible to determine the applicable compensation policies, especially those applying in the case of the more senior officers of the credit institution, having overall regard to risk, capital liquidity and expected income. In addition, remuneration policies are controlled by the internal audit function of the credit institution. It is noted that all officers participating in the remuneration review process must be independent, from a corporate governance perspective.
The remuneration practice of Greek credit institution is disclosed to the BoG. Such information is also communicated to the European Banking Authority ('EBA') which maintains an overall assessment of remuneration trends and practices in the EU.
Has the jurisdiction implemented the Basel III framework with respect to regulatory capital? Are there any major deviations, e.g., with respect to certain categories of banks?
The Basel III framework on bank capital adequacy standards and requirements has been indeed transposed into the Greek legal order. Regulation 575/2013 (Capital Requirements Regulation) is directly applicable in Greece whereas Directive 2013/36/EU (Capital Requirements Directive IV) has been transposed through the enactment of Law 4261/2014.
Law 4261/2014 does not introduce any major deviations with respect to the Basel III regulatory capital requirements, as those are specified in the EU Capital Requirements framework.
Are there any requirements with respect to the leverage ratio?
Yes. As determined by the ECB, the leverage ratio of EU credit institutions must not be lower than 3%. All Greek banks are required to report their leverage ratio, calculated on the basis of the methodology of article 429 of Regulation 575/2013 (as subsequently amended), on a quarterly basis to the BoG.
What liquidity requirements apply? Has the jurisdiction implemented the Basel III liquidity requirements, including regarding LCR and NSFR?
As per the provisions of the Regulation 575/2013 (Capital Requirements Regulation), as of 1 January 2018, all credit institutions operating in Greece must comply with the Basel III liquidity requirements, including the liquidity coverage ratio ('LCR') and the net stable funding ratio ('NSFR').
Regulation 2015/61 (supplementing the Capital Requirements Regulation) includes provisions elaborating on the obligation of credit institutions to maintain a liquidity coverage ratio of at least 100%. Likewise, legislative initiatives regarding the specification of the NSFR framework are currently in progress at EU level.
In Greece, credit institutions must periodically report both their LCR and their NSFR to the BoG.
Do banks have to publish their financial statements?
Yes. Furthermore, credit institutions are required to publish the following information on the 30th of June of each calendar year:
- their registered name(s), nature of activities, and geographical location(s)
- their turnover
- number of staff employed on a full-time (or equivalent basis)
- annual results before tax
- taxes on income and
- state aid received.
This information shall be published, where possible, as an annex to the annual financial statements. The annual financial statements of credit institutions must also include key performance indicators, such as return on assets and return on investments.
Does consolidated supervision of a bank exist in the jurisdiction? If so, what are the consequences?
Yes, Law 4261/2014 includes detailed provisions on consolidated supervision. As a matter of principle, where the parent undertaking is established in Greece, consolidated supervision shall be exercised by the BoG or the HCMC (depending on whether such parent undertaking is licensed as a credit institution or an investment company). Where the parent undertaking is established in another EU member state, supervision over its subsidiaries in Greece on a consolidated basis shall be exercised by the competent authority of the member state supervising the parent undertaking.
What reporting and/or approval requirements apply to the acquisition of shareholdings in, or control of, banks?
Reporting and approval requirements apply in the case of the so-called 'qualifying holdings.' In particular, a direct and/or indirect acquisition of shares and/or voting rights in a credit institution, so that the participation of the prospective acquirer(s) reaches or exceeds the thresholds of 20%, 1/3 and 50% triggers an obligation to prospective acquirers, whether individuals or legal entities, to notify such transactions to the BoG for clearance.
In addition, although not strictly constituting a 'qualifying holding,' any direct and/or indirect acquisition of shares and/or voting rights in a credit institution, so that the participation of the prospective acquirer(s) reaches or exceeds the threshold of 5% must be likewise be notified to the BoG for approval. In such case, the latter will assess whether such acquisition is likely to lead to significant influence over the credit institution in question.
Does the regulatory regime impose conditions for eligible owners of banks (e.g., with respect to major participations)?
Yes. Law 4261/2014 sets forth a series of qualitative requirements which should be met by holders of 'qualifying holdings' or holdings that are likely to lead to significant influence over a credit institution. In particular, in determining whether to provide clearance to a proposed acquisition (see Question 15 above), the BoG assesses the suitability of the prospective acquirer and the soundness of the transaction, on the basis of the following criteria:
- the reputation of the proposed acquirer
- the reputation and experience of the proposed new managers
- the financial soundness of the proposed acquirer
- the impact of such acquisition on the credit institution with particular regards to the ability of the credit institution to comply with its prudential supervision obligations and
- any risk from potential ties of the proposed acquirer to money laundering or terrorist financing activities.
The BoG and/or the ECB may request from prospective acquirers to satisfy specific conditions or requirements, provided that the latter relate to either of the five (5) criteria enumerated above.
Are there specific restrictions on foreign shareholdings in banks?
No. However, the BoG and/or the ECB may request from foreign prospective acquirers to satisfy specific conditions or requirements, provided that the latter relate to either of the five (5) criteria ennumerated in Question 16 above. Such a request will be likely, where the proposed acquisition may be considered as resulting a significant change in the structure of the credit institution and which may potentially disrupt the overall functioning of the banking system.
Is there a special regime for domestic and/or globally systemically important banks?
The four (4) systemic Greek banks fall within the scope of prudential supervision of the ECB in view of their role in maintaining stability in the economy of the EU (see also Question 1 above).
In addition, Law 4261/2014 transposes the provisions of article 131 of Directive 2013/63/EU pertaining to Global-Systemically Important Institutions ('G-SII') and Other-Systemically Important Institutions ('O-SII'). G-SII and O-SII are identified on the basis of criteria such as their size, interconnection with the financial system, complexity, substitutability of services and range of cross-border activities; given their importance for the economy, the BoG is entitled to determine specific capital buffer requirements applying to such institutions.
What are the sanctions the regulator(s) can order in the case of a violation of banking regulations?
Notwithstanding the potential civil and/or criminal liability that may arise, an infringement of the banking regulations may trigger the imposition of one or more of the following administrative sanctions by the BoG according to the provisions of Law 4261/2014:
- issuance of public announcement specifying the infringement and the person liable for the infringement,
- request to the person liable for the infringement to cease the infringement and refrain its commission in the future,
- fines up to 10% of net turnover (if the infringement was committed by a legal entity) or the amount of € 5million (if the infringement was committed by an individual), in case the benefit gained out of the infringement is subject to quantification, fines that are equal to double the value of such benefit.
The authority of the BoG extends to the adoption of corrective measures such as removal of the liable persons from the board of directors of the credit institution, the suspension of voting rights and the prohibition of certain transactions.
The BoG or the HCMC shall cooperate with other authorities in Greece and/or in the EU, in order to ensure the effective imposition and implementation of such sanctions.
What is the resolution regime for banks?
The bank resolution framework in Greece is mainly determined by law 4335/2015, whose procedures transposed Directive 2014/50/EU (Bank Recovery and Resolution Directive) into Greek law.
Law 4335/2015 designates the BoG as the competent resolution authority in Greece and establishes, in line with EU legislation, a three-pillar scheme, comprising of the following phases:
- Early intervention, and
For a credit institution to qualify for the resolution phase, the following conditions must be cumulatively met:
- the BoG determines that it is failing or likely to fail;
- there is no reasonable prospect that alternative measures from the private sector or any other supervisory action, including early intervention measures, can prevent the institution from failing; and
- the resolution actions is necessary in the public interest.
To ensure an efficient resolution process, the BoG may make use of the following resolution tools:
- The sale of business tool;
- The bridge institution tool;
- The asset separation tool and
- The bail-in tool.
How are client’s assets and cash deposits protected?
The Hellenic Deposit and Investment Guarantee Fund ('HDIGF') was established in order to protect clients' assets and cash deposits from bank failures. The purpose of the HDIGF is to compensate depositors and/or investors, in the event the credit institutions falling within its scope are unable to fulfill their obligations vis-à-vis the latter.
The HDIGF guarantees the amount of €100,000 in respect of the aggregate deposits per depositor at a given credit institution; such threshold applies irrespective of the number of deposits, their location and the currency in which they are held.
Does your jurisdiction know a bail-in tool in bank resolution and which liabilities are covered?
Yes (see also Question 20 above). The provisions of Directive 2014/50/EU referring to the write-off or conversion to equity ('bail-in') of claims of credit institutions are transposed by virtue of articles 43 and 44 of law 4335/2015.
In principle, the 'eligible liabilities' covered by the bail-in tool include all liabilities that are not explicitly excluded from its scope. Law 4335/2015 expressly excludes a series of liabilities, such as deposits secured by the HDIGF and other guaranteed deposits, pledged cash collateral in exchange for a loan secured liabilities such as covered bonds, client assets and money held on behalf of protected clients, liabilities to other credit institution and investment firms and liabilities vis-à-vis employees, providers of day-to-day goods and services and the tax and social security authorities. In addition, the BoG may exclude from coverage other categories of liabilities in extraordinary circumstances.
Is there a requirement for banks to hold gone concern capital (TLAC)?
Not yet. However, legislative initiatives are currently in progress at EU level in respect of the amendment of the own funds and eligible liabilities ('MREL') framework, so as to bring the latter in line with the Total Loss-Absorbing Capacity ('TLAC') requirement. As a member-state of the EU, Greece will be expected to transpose the relevant provisions in its national legal order, following their enactment.
In your view, what are the recent trends in bank regulation?
Further to the enactment of laws 4261/2014 and 4335/2015, the Greek banking sector has been subject to significant reform. We expect that this 'reform wave' will continue in the upcoming years, having also regard to the trends in international financial regulation: as of 2018, credit institutions are expected to comply with IFRS 9 and the LCR / NSFR liquidity requirements whereas in 2019 the TLAC requirement will enter into force for G-SII.
With respect to issues of local interest for Greece, we anticipate developments in the framework governing the management of non-performing loans ('NPL') as well as the gradual loosening of the capital control regulations. On another note, the existing trend relating to the sale of non-core banking activities (e.g., leasing and insurance) by local banks, as a result of commitments undertaken in the context of the recent recapitalizations of the latter, is expected to continue to boost M&A activity in Greece in the coming years.
What do you believe to be the biggest threat to the success of the financial sector ?
Ever since the outbreak of the recession in 2008, the financial sector in Greece has faced many challenges, from the implementation of the capital control regulations to the resolution of numerous banks. In recent years, serious steps have been taken to consolidate the Greek banking system and improve the liquidity of the Greek systemic banks; most notably, the adoption of an efficient framework to handle the threat of NPLs has been key in this respect. Nevertheless, there is still significant progress to be made in terms of restoring the credibility of the Greek financial sector and the confidence of investors and depositors therein.