Greece’s government maintains an estimated $38 billion cash liquidity buffer as of June 2022. Capital controls were completely lifted in September 2019 and Greece successfully exited the European Commission’s economic Enhanced Surveillance Framework in August 2022. Greece will remain subject to post-program surveillance monitoring by euro area creditors until it repays 75 percent of financial assistance, expected in 2059.
The health of Greece’s banking system has improved significantly following the financial crisis, in part due to substantial reductions of non-performing loans (NPL), including via the securitization of NPLs through the “Hercules” program. The NPL ratio decreased from a crisis high of 45 percent in 2017 to less than 10 percent at the end of 2022.
The bond market in Greece is fully deregulated; however, it is still dominated by the issuance and trading of government bonds. Interest on corporate bonds is exempt from tax if earned by a non-resident. The Athens Stock Exchange (ASE) has been widely used as a source of capital financing.
In 2023, the European Investment Bank and HSBC Bank announced a 200 million euro trade finance partnership which will support trade and export finance services provided by participating Greek banks to local companies.
The Greek banking system has been substantially liberated from political patronage prevalent in the past, and now extends credit based on international best practices and credit risk scoring models. A large and profitable firm can secure financing at rates lower than those offered to a self-employed professional because of the problems assessing an individual’s creditworthiness. A credit bureau has been set up by the Federation of Greek Banks, but it is still of limited use (Greek personal data protection laws limit its scope). Matters are made worse by widespread tax evasion (estimated to be 20% or more of GDP), with some individuals hiding income from the tax authorities, which leads to higher interest rates for members of the public when they attempt to secure a loan.
Banking Systems: Greece’s banking system is recovering from a decade-long economic crisis that created a large stock of nonperforming loans (NPLs). The health of Greece’s banking system has improved significantly following the financial crisis, in part due to substantial reductions of non-performing loans (NPL) (including via the securitization of NPLs through the “Hercules” program). The NPL ratio decreased from a crisis high of 45 percent in 2017 to less than 10 percent at year-end 2022. The strong economic recovery in Greece in 2021, coupled with accommodative monetary and fiscal policies to mitigate the impact of the COVID-19 pandemic, contributed to improved liquidity conditions. Banks successfully continued their efforts to clean up their loan portfolios. This laid the groundwork for banks to resume their financial intermediation role and thus contribute to sustainable economic growth. However, banks continue to face challenges including the legacy stock of non-performing loans still on bank balance sheets; the low quality of Greek banks’ prudential own funds, given the large share of deferred tax assets; and low operating profitability. Currently, banks enjoy adequate liquidity and capital buffers that allow them to provide lending to the economy.
Greece has a reasonably efficient capital market that offers the private sector a wide variety of credit instruments. Credit is allocated on market terms prevailing in the eurozone and credit is equally accessible by Greek and foreign investors. An independent regulatory body, the Hellenic Capital Market Commission, supervises brokerage firms, investment firms, mutual fund management companies, portfolio investment companies, real estate investment trusts, financial intermediation firms, clearing houses and their administrators (e.g. the Athens Stock Exchange), and investor indemnity and transaction security schemes (e.g. the Common Guarantee Fund and the Supplementary Fund), and also encourages and facilitates portfolio investments.
Owner-registered bonds and shares are traded on the Athens Stock Exchange (ASE). It is mandatory in Greece for the shares of banking, insurance, and public utility companies to be registered. Greek corporations listed on the ASE that are also state contractors are required to have all their shares registered.
Greece has not announced that it intends to implement or allow the implementation of blockchain technologies in its banking transactions.
Foreign Exchange Controls: Greece’s foreign exchange market adheres to EU rules on the free movement of capital. Although the government-imposed capital controls in 2015, at the height of the crisis, on September 1, 2019, all capital controls were removed. Greece is a member of the euro area, which employs a freely floating exchange rate. Greece is not engaged in currency manipulation for the purpose of gaining a competitive advantage.
U.S. Banks and Local Correspondent Banks: The Greek banking system consists of a central bank (Bank of Greece, which is a Eurosystem-member central bank) and another 35 credit institutions. Fourteen credit institutions are incorporated in Greece (nine commercial banks and five local cooperative banks). Nineteen credit institutions are branches of commercial banks incorporated in other EU member states, including four Europe-based subsidiaries of U.S.-headquartered banks (Bank of America, Citibank, Goldman Sachs, and J.P. Morgan). Another two credit institutions are branches of foreign banks incorporated outside the EU. According to the Bank of Greece, banks are the main pillar of the Greek financial system, with credit institution assets comprising 88.5 percent of total financial system assets. Greek commercial banks represent 97 percent of domestic credit institution assets, with branches of foreign banks accounting for 2 percent of credit institution assets. The four largest Greece-based credit institutions – National Bank of Greece, Piraeus Bank, Alpha Bank, and Eurobank – are designated as Other Systemically Important Institutions (O-SII) under European Banking Authority (EBA) guidelines and control approximately 95% of the Greek domestic banking market in terms of total assets.
According to the Bank of Greece, the stability of the Greek banking system has improved substantially, and banks are better positioned than in the past to withstand external shocks. Liquidity conditions continue to improve following Greece’s emergence from a decade-long financial crisis, driven by increased resident deposits, full access to capital markets, and participation in Eurosystem financing operations. Banks generally maintain adequate capital, above regulatory minimums. The four systemically important banks have achieved significant reductions in the share of nonperforming loans on their balance sheets (down from a financial crisis peak of nearly 50 percent of the loan portfolio in 2016 to 8.7 percent at year-end 2022), largely as a result of the Hercules securitization scheme.
For more information on the banking system please read the section Capital Markets and Portfolio Investment of the Investment Climate Statement.