Before granting the protection provided by the Consumer Protection Law, it is standard practice for the Greek courts to examine first whether a plaintiff qualifies as a consumer. In a recent case before the Supreme Court, the plaintiff claimed to be a consumer in order to have her case to be heard before the Greek courts, rather than the Swiss courts as agreed in her loan and pledge agreements.
A memorandum of agreement signed by the government, the European Commission, the European Central Bank and the International Monetary Fund provides for the foundation of a monetary and financial stability fund. The aim of the fund is to maintain the stability of the national banking system by supporting the capital adequacy of banks operating in Greece and creating a safety net for this purpose.
Law 3816/2010 is a controversial piece of legislation which was enacted after lengthy debate on a Ministry of Economy, Competitiveness and Shipping initiative. The aim of the law is to keep businesses solvent by means of the compulsory rescheduling of their banking debt. The basic function of the law is to reschedule performing and non-performing loans and facilities.
Greece began the year rather badly in terms of creditworthiness. However, doubts over demand for bonds at reasonable spreads faded and spreads tightened as fragile confidence has been gradually rebuilt. The new moderately socialist government is expected to do better at addressing contentious issues within the economy, in terms of both revenue and spending.
The National Bank of Greece has anticipated the need for capital in the banking sector with a €1.25 billion share issue, which has caught most of the other major Greek banks off guard, although some smaller banks have already launched or are implementing capital increases. The Greek credit rating bureau Teiressias has introduced a credit-scoring system, the effect of which remains to be seen.
The state support plan for Greek banks, which aims to enhance liquidity in the domestic market, is facing a number of implementation difficulties. As a result, its progress has been disappointing. Some problems relate to the plan's incompatibility with existing corporate legislation (eg, in the case of equity support by issue of preferred shares to the state against state bonds in lieu of cash); others have to do with the form of support.
In the effort to overcome the worldwide financial crisis, every available financing tool is useful. Governments should aim to make financing accessible, legally stable and cost effective (including applicable taxation). Unfortunately, such goals are not always well served; this update provides two controversial examples relating to the function of cash pooling and certain bond loans in Greece.
Amid controversy and disputes between the government and banks as well as banks and borrowers, Parliament has voted on the much-debated Liquidity Enhancement of the Economy Bill, which is intended to address the effects of the international financial crisis. The total value of the state support package reads €28 bilion but is in fact capped at €23 billion.
Probably the most obvious risk that the Greek banking system faces in the current economic crisis is limited liquidity. Although a general drop in turnover and profitability in Greek banking business should be expected, extensive casualties would come as a surprise. A probable effect will be an acceleration of the prospective concentration in the Greek banking sector.