The flow of new bank loans being provided by lenders is being poured, almost exclusively, into large businesses with small players and the self-employed remaining practically without access to the banking system.
According to data from the Bank of Greece, credit expansion in the January-October period to businesses hit 9%, while for small businesses and freelancers the rate is only at 0.5%.
According to the figures, the net flow of new loans (new disbursements minus repayments of old loans) to the private sector reached 3.65 billion euros for the ten month period. In fact, the net inflows of new loans concern exclusively the largest companies with net financing amounting to 5.2 billion euros. On the contrary, the total net financing for small businesses and freelancers amounts to only 76 million euros.
Even worse is the lending picture to households, which stands at -1.2 billion euros. ie the loans repaid in the ten months were much higher than new loans disbursed.
According to banks, loan disbursements in the first ten months of 2020 have risen to 15 billion euros (excluding repayments of old loans), which is a record performance, a result of many support programs, such as TEPIX, and an effort by banks to support their customers.
Thus, despite the high rates of credit expansion, there are many complaints in the market about the inability of thousands of companies to join state liquidity support programs, but also concerning the negative stance of banks to provide them with mush needed credit.
Entrepreneurs, institutions and top government officials, such as the Minister of Finance, Christos Staikouras, and the Minister of Development, Adonis Georgiadis, have strongly criticized the banking system for bureaucracy, rigidity and overly strict lending criteria.
In fact, Staikouras has stated several times that "the banking system is expected to provide financing to businesses and households without guarantees or public programs, because, from the beginning of the year, they have received from the European Central Bank 37 billion euros, most of which is with negative interest rates, while deposits have increased.”
What banks say
For their part, banks point out that loans are given on the basis of specific banking criteria, acknowledging that a large number of businesses, especially small ones, cannot meet these standards. However, they argue, that this is not due to overly due strict criteria but because a large number of companies have weak balance sheets. The situation has been made worse by the fact that Greece has found itself under pressure from its ten-year economic crisis that lead many businesses to a breaking point.
They emphasize that banks are supervised by the ECB and operate on the basis of specific procedures and frameworks, which they cannot circumvent. In addition, they emphasize that it is absolutely necessary not to create a new generation of non-performing loans, destabilizing the banking system and the domestic economy in general.
They note that the non-performing credit exposure ratio at the end of 2017 (ie before the sale of npls began) had reached 65.4% for micro-enterprises and 57% for small and medium-sized enterprises. That is, more than 6 out of 10 loans were not repaid.
As for the state-guaranteed liquidity enhancement programs, they emphasize that these are European programs granted with specific terms and conditions, which the banks are obliged to stick to.
The problem, bank executives note to Business Daily, is that these programs are designed for countries with more competitive economic structures and target larger companies rather than Greece’s small and medium-sized enterprises.
The problematic structure of Greek business was referred to last week by Grant Thorton CEO Vassilis Kazas, while emphasizing the need to use the Recovery Fund to create larger and more competitive companies that emphasize extroversion.
As Kazas noted: "99% of Greek businesses are small and medium enterprises. 48% of them employ less than 9 people. So their competitiveness and productivity are very low. They need to invest in digital transformation and maybe through microfinancing we can give access to lending to some which do not meet the standard lending criteria. The primary sector is also of strategic importance for economic activity. But here there is fragmentation, low competitiveness, dependence on subsidies. Collaborative systems should be developed to verticalize production and increase added value. Greek industry is of significant importance for the transformation of the Greek economy.
Today, Greek industrial products contribute only 9% of GDP, a very small percentage if we compare it with those of the European Union. There should be research and development for accelerated depreciation on business energy costs, which is 40% higher than the European average. The main goal should be to improve the productivity, competitiveness and extroversion of Greek companies ".