HELLENIC BANK ASSOCIATION 8 TH INTERBALKAN FORUM OF BANKING ASSOCIATIONS

1. HELLENIC BANK ASSOCIATION 8TH INTERBALKAN FORUM OF BANKING ASSOCIATIONS CROSS-BORDER SUPERVISORY COOPERATION IN THE SE EUROPE REGION: THE BANK OF GREECE’s EXPERIENCE Panagiotis Kyriakopoulos Director Department for the Supervision of Credit and Financial Institutions

2. CONTENTS • Brief overview of the Greek banking sector. • Reasons for cross-border cooperation. • Bank of Greece’s experience. • The Multilateral MoU. • Concluding remarks. 2

3. Supervised Credit Institutions by the Bank of Greece • In 2005 figures, Loans & Consignment Fund and Postal Saving Bank are included. The latter, in 2006 figures is treated as a commercial bank. • Including both branches and subsidiaries of Greek banks established abroad. 3

4. Greek Banking System vs. Eurozone– 2006 Assets / GDP Corporate Loans / GDP Mortgage Loans / GDP Consumer & Other Loans / GDP 4

5. Interest Rate Spreads (Gr – EuroArea) 5

6. ROA & ROE (on a consolidated basis) - NPL ROEafter taxes and extraordinary items: 14.0% in 2006. ROAafter taxes and extraordinary items: 1.0% in 2006. NPL (above 3 months without taking into account collateral): 5,1% in the first semester of 2007 from 6,3% in 2005. 6

7. Capital Adequacy ratio (on a consolidated basis) Solvency ratio:12.2% in 2006 (EU-27 banks: 11.8% in 2006). Tier I solvency ratio:9.9% (EU-27 banks: 8.0% in 2006). THE IMPACT OF SUB-PRIME TURMOIL TO THE GREEK BANKING SECTOR • Not direct exposure. • Mainly an impact on the cost of funding. 7

8. Reasons for cross-border cooperation (1/2) • Especially for SEE: to promote efficiency and stability of financial sectors in the region. • Increasing internationalization of SEE’s banking systemsdue to the: - Increasing public confidence in the financial system. - Liberalization of the provision of financial services. - Privatization of many state-owned banks. - Benign macroeconomic environment. 8

9. GREEK BANKS’ PRESENCE IN SE / CE EUROPE Market shares in terms of assets as of end 2006 (approx.) 9

10. Reasons for cross-border cooperation (2/2) • The risks faced today do not end at national frontiers or even at the EU. • Trend for centralization of critical functions. • EU policies (CEBS promotes cooperation and convergence of supervisory practices, through guidelines, delegation of tasks and responsibilities) • Crises simulation exercises enhanced preparedness of supervisory authorities… • …room for further improvement. 10

11. BILATERAL MoUs The Bank of Greece signed bilateral MoUs with countries were Greek banks had significant presence that served the need to establish a practical framework of cooperation at the early stages. • Based on: • Reciprocity / mutual trust & understanding. • International guidelines & practices. • Objectives: • Set basic elements of home-host supervisory responsibilities; • Facilitate on-going supervision under normal times through regular information exchange; but… • …no specific reference to financial stability, contingency plans & crisis management. 11

12. PRACTICAL EXPERIENCE Overall positive experience • Different starting points • Differences in regulation & supervisory practices • Gradual adoption of BIS standards • Orientation towards EU membership • Share common objectives 12

13. POTENTIAL CONSTRAINS Potential areas of conflict and obstacles cannot change overnight, but should be seen in a dynamic way and be resolved within an evolutionary and flexible process. In this context, several issues are emerging and need to be addressed: • The lack of equivalent responsibilities of those provided for in Art 129 (model validation). • Regarding subsidiaries, due to catching up process, there is a growing need to evaluate risks from the home-country perspective. • Public interest considerations. • Identification of systemically important entities: • Subsidiary may be insignificant for home but systemic for host country. • Flexibility rather than explicit quantitative criteria. • Crisis management. 13

14. MoU ON HIGH LEVEL PRINCIPLES OF CO-OPERATION AND CO-ORDINATION IN SE EUROPE An effort to address some of the “obstacles” Signed by the Governors of Central Banks of Albania, the Bulgaria, Cyprus, Former Yugoslav Republic of Macedonia, Greece, Romania and Serbia (July 2007) on the initiative of Mr. Nicholas Garganas, Governor of the Bank of Greece. 14

15. MoU’s KEY CHARACTERISTICS • Compliant with the existing legal framework • Jurisdiction of each Party; • Set high level principles • Avoid rigid application of detailed rules & procedures; • Identify areas of concern & set principles of cooperation. • Best practices oriented • Explore the degree of participation of other countries. 15

16. MoU’sOBJECTIVES Structured cooperation to develop common culture. Potential obstacles’ identification. Information exchange. Alleviate supervisory burden. Allocation of tasks (on an evolutionary manner; reallocation in the long run). Addressing issues concerning financial stability and enhance preparedness for managing cross-border crises. Joint assessment of groups’ risk profile. Combat AML/CFT acknowledging accentuated exposure of cross-border banking groups. 16

17. CONCLUDING REMARKS • Convergence of supervisory practices should be regarded as the end of a rather long-term process… …but we should start by developing a common understanding. • Not to wait for solving out the issues aroused but act proactively. • Strike a balance between the market pressure to reduce the supervisory burden and improve the efficiency of supervision with the mandate to safeguard financial stability in the region. 17

18. Thank you very much for your attention… 18