Banking Regulation 2022

Last Updated September 14, 2021

Greece

Law and Practice

Authors



Moratis Passas advises many key firms in the Greek banking and financial market. It is widely recognised for its leading banking, capital markets, finance and regulatory expertise, which, together with its multi-jurisdictional capacity, enables the firm to provide an international perspective coupled with an understanding of local clients’ needs. Moratis Passas often acts for clients from around the world on high-profile and complex financial transactions and projects. It has extensive experience and a proven track record in M&A, securitisation projects, joint ventures, shareholders’ agreements, and company and partnership formations, as well as general corporate governance, representation and day-to-day business matters.

Banking supervision in Greece is regulated by the Single Supervisory Mechanism (SSM), which was established under EU Regulation 1024/2013. This Regulation confers powers on the European Central Bank (ECB) for the prudential supervision of credit institutions. Its operational framework is specified by Regulation 468/2014, establishing the framework for co-operation between the ECB, the national competent authorities and the national designated authorities within the SSM.

Under the above regulatory framework, the ECB has undertaken the direct prudential supervision of banks that are established in the eurozone and classified as significant, while the remaining institutions are supervised by the national competent authorities, under ECB guidance. The following Greek banks are subject to direct supervision by the ECB, in co-operation with the Bank of Greece (BoG):

  • Alpha Bank SA;
  • Eurobank SA;
  • National Bank of Greece SA; and
  • Piraeus Bank SA.

Smaller institutions are subject to the prudential supervision of the BoG, which seeks to protect the soundness, financial health and stability of the financial system and ensure that banks do not undertake excessive risks that may endanger their performance. Prudential supervision includes assessing the solvency and liquidity of the banks, as well as the strategies, internal procedures and mechanisms implemented thereby to ensure compliance with the above EU regulatory framework as well as Law 4261/2014, as recently amended by Law 4799/2021 transposing Directive 2019/878 (CRD V) (the Banking Law). It also monitors compliance with Regulation 575/2013 (CRR I) as amended by virtue of Regulation 2019/876 (CRR II) (hereinafter commonly referred to as CRR) and Level 2 measures on regulatory reporting, capital adequacy and liquidity requirements.

Moreover, in accordance with Law 4557/2018 as amended by Law 4734/2020, implementing Directives 2015/849 and 2018/843 on the prevention and control of money laundering and terrorist financing, the BoG is appointed as the competent authority for the supervision of compliance with AML/CFT provisions. In July 2021, Greece transposed Directive 2018/1673 by virtue of Law 4816/2021 amending Law 4557/2018. The most important amendments of said law concern the expansion of the list of tax violations that are determined as predicate offences that may lead to prosecution for money laundering (the AML/CTF Laws).

Finally, the Hellenic Capital Market Commission (HCMC) undertakes the supervision of Greek banks with regard to the provision of investment services and related activities as well as compliance with requirements of Law 4514/2018, implementing the MiFID II Law. Furthermore, the HCMC is the competent authority for market abuse for Greek banks with listed shares pursuant to the Market Abuse Regulation (Regulation 596/2014) and Law 4443/2016.

The core legal and regulatory framework governing the operation of banks in Greece comprises the following:

  • the SSM Regulation;
  • the SSM Framework Regulation;
  • the Single Resolution Mechanism;
  • the CRR;
  • the Sociétés Anonymes Law (Law 4548/2018) – the SA is the predominant legal structure of banks established and operating in Greece;
  • the Banking Law; and
  • relevant acts issued by the BoG: BoG Governor’s Acts, BoG Executive Committee Acts, BoG Banking and Credit Matters Committee Decisions and BoG Credit and Insurance Committee Decisions. These acts regulate the granting of banking licences, internal control systems and corporate governance issues, obligations arising from the AML/CTF Laws, reporting obligations and transparency in banking transactions.

The following pieces of EU and Greek legislation supplement the above core legal and regulatory framework:

  • Directive 2014/59 (bank recovery and resolution, or BRRD I), as amended by Directive 2019/879 (BRRD II) (hereinafter commonly referred to as BRRD); BRRD I was transposed by Law 4335/2015 as amended by Law 4799/2021 which in turn transposed BRRD II into Greek legislation (the BRRD Law);
  • Directive 2014/49 (on deposit guarantee schemes), transposed by Law 4370/2016;
  • Financial Action Task Force (FATF) recommendations and the relevant EU legal framework;
  • Law 4537/2018, implementing Directive 2015/2366 (the PSD II Law); and
  • the MiFID II Law.

Banks established and operating in Greece must be authorised by the BoG. Since 4 November 2014, all banks need authorisation from the ECB to operate in a member state that is part of the SSM, which Greece is. Natural or legal persons that are not qualified as credit institutions are prohibited from taking deposits or other repayable funds from the public.

In particular, Greek banks may be established and operate as the following:

  • SAs;
  • credit co-operatives;
  • European companies (societas Europaea); or
  • European co-operative societies.

Greek SA banks (the predominant legal structure of banks established and operating in Greece) adhere to SA regulations, while banks in the form of credit co-operatives are regulated by Law 1667/1986. Moreover, banks may be licensed to perform all banking activities listed in Annex I of the CRD IV. These activities include:

  • the acceptance of deposits or other repayable funds;
  • the lending or granting of other credits, including consumer credit, credit agreements relating to immovable property, factoring, with or without recourse, and the financing of commercial transactions (including forfaiting);
  • financial leasing;
  • payment services as defined in Article 4(3) of the PSD II Law;
  • issuing and administering other means of payment (ie, travellers' cheques and bankers' drafts) insofar as such activity is not covered by the above point;
  • guarantees and commitments; and
  • dealing on its own account or on account of customers in any of the following:
    1. money market instruments (cheques, bills, certificates of deposit, etc);
    2. foreign exchange;
    3. financial futures and options;
    4. exchange and interest-rate instruments;
    5. transferable securities;
    6. participation in securities issues and the provision of services relating to such issues, particularly underwriting;
    7. advising undertakings on capital structure, industrial strategy and related questions, and on services relating to mergers and the purchase of undertakings;
    8. money broking;
    9. portfolio management or advice;
    10. safekeeping and administration of securities;
    11. credit reference services, including customer credit rating;
    12. safe custody services;
    13. issuing electronic money; and
    14. investment services and activities as well as ancillary services provided for in the MiFID II Law.

Further to the activities described in Annex I of the CRD IV, banks are allowed to carry out other financial or secondary activities, according to the applicable legislation, provided that the relevant risks are fully hedged.

In addition, a credit co-operative may conduct banking transactions solely with its members, other banks and the government. Subject to prior approval by the BoG, it may also carry out banking transactions with non-members, with a maximum allowed amount of 50% of its total loan or deposit business.

Licensing requirements are as follows:

  • fully paid up initial capital equal to at least EUR18 million, or EUR9 million in the case of third country branches, or EUR6 million in the case of banks and credit co-operatives licensed as banks, as well as any additional funds that may be required in order to ensure that, during its first three years in operation, the new bank's own funds meet the expected capital requirements and the minimum initial capital on a continuous basis;
  • at least two persons effectively directing the bank’s business and participating as executive members of its board of directors (BoD);
  • Greek banks need to have both their head office and registered office in Greece; and
  • compliance with conditions for participation in the Hellenic Deposit and Investment Guarantee Fund (TEKE).

Licensing applications are exclusively submitted to the BoG which, via the provisions of the BoG Executive Committee’s Act 142/11.06.2018 as recently amended by BoG Executive Committee’s Act 178/4/2.10.2020, and the Banking and Credit Committee Decision 211/1/5.12.2005, determines the contents thereof, the documentation and information required, the specific conditions and the licensing procedure to be followed. Where the BoG assesses that the legal conditions for licensing under the Banking Law are met, it proceeds to the submission of a proposal in the form of a draft licensing decision to the ECB. Alternatively, if per the BoG assessment the respective requirements are not met, the BoG rejects the licensing request. Unless the ECB objects, the BoG proposal is deemed to be adopted.

Applications for licensing must, inter alia, be accompanied with:

  • a programme of operations setting out the types of business envisaged and the structural organisation of the bank, including an indication of the parent undertakings, financial holding companies and mixed financial holding companies within the group. The programme of activities mentions in particular the scope of work, the timetable for achieving the objectives of the credit institution, the structure of the group to which it belongs and the framework of the Internal Audit System, including the internal audit, risk management and compliance functions and procedures required for compliance with its organisational obligations;
  • fit-and-proper assessment with respect to the BoD members, the key function holders and the AML officer;
  • information on shareholders with holdings exceeding 1%;
  • information about the heads of the critical functions, including their identity, reputation, education, any criminal convictions, property, experience and training; and
  • draft Articles of Association.

Time and Cost Estimation

Where the BoG rejects a licensing application, it notifies the applicant of its decision and the reasons therefor, within six months of its receipt. Where the application file is incomplete, the BoG must notify within six months of the receipt of the complete application file. In any case, under the Banking Law a decision to grant or refuse licensing may be taken within 12 months of the receipt of the application.

No statutory/regulatory fees are required for the submission of the respective licensing application to the BoG, except for legal fees or fees paid for advisers (ie, tax or finance).

With regard to the establishment of EU or EEA-licensed banks, the Banking Law has fully implemented the single passport principle. Therefore, such banks that are licensed in their home Member States may perform banking activities in Greece, either through an establishment or on a cross-border basis, subject to relevant notification being sent to the BoG by the home Member State regulator.

Finally, pursuant to the Banking Law in conjunction with the MiFID II Law, non-EU or non-EEA-licensed banks may carry out banking activities in Greece, either through an establishment or on a cross-border basis, subject to obtaining a licence from the BoG. In such cases, the provisions of BoG Executive Committee’s Act 58/18.1.2016 regarding the establishment and operation of branches of credit institutions established in third countries shall apply.

The terms and conditions for the acquisition or increase or decrease of a qualifying holding in a bank (ie, a direct or indirect holding in an undertaking that represents 10% or more of the capital or of the voting rights, or that makes it possible to exercise a significant influence over the management of that undertaking) are laid down in the Banking Law, and are further specified in BoG Executive Committee’s Act 142/11.6.2018 (as amended by BoG Executive Committee’s Act 178/2.10.2020) and Banking and Credit Committee’s Decision 211/1/5.12.2005.

In particular, any natural person or legal entity deciding to do the following must pre-notify the BoG in writing, indicating the size of the intended holding and the fulfilment of the conditions required by the BoG:

  • directly or indirectly acquire a qualifying holding in a bank (ie, 10%); or
  • increase a qualifying holding as a result of which either the proportion of the voting rights or the capital held would reach or exceed the thresholds of 20%, 50% or one-third, or so that the bank would become its subsidiary.

Under the Banking Law, pre-notification to the BoG is also required for an acquisition of a holding amounting to at least 5%. However, in this case the BoG will assess – within five working days – whether the holding will lead to a significant influence over the bank and, if so, will notify the proposed acquirer and conduct an assessment on the conditions required for the acquisition.

Upon assessment of the proposed acquisition, the BoG will prepare a draft decision for the ECB to oppose or accept, based on specific criteria. If the ECB does not oppose the intended acquisition within 60 days, it will be deemed approved.

The BoG may, on a discretionary basis, request an assessment of a proposed acquisition even for less significant changes in the bank’s holdings (eg, where the acquired holding exceeds 1% of the bank’s share capital).

In principle, the applicable regulatory process does not distinguish between a Greek and foreign acquirer, except for in the following:

  • the extension of the assessment period to a total of 90 days, where the BoG requests additional documents from a proposed acquirer that is situated or established in a third country or that is not subject to supervision under the CRD IV and CRD V, the MiFID II, the EU Solvency II Directive (2009/138/EU) or the EU Undertakings for the Collective Investment in Transferable Securities Directive (2009/65/EU); and
  • co-operation between the BoG and the competent authorities of a foreign proposed acquirer.

In order to ensure the sound and prudent management of the bank in which the acquisition is proposed, the BoG will review the notification and all information provided, assess the suitability of the proposed acquirer and the financial soundness of the proposed acquisition, and consider the following:

  • the reputation and reliability of the proposed acquirer;
  • the reputation, knowledge, skills and experience of the members of the BoD that shall direct the operations of the bank following the proposed acquisition, as well as those of the key function holders;
  • the financial soundness of the proposed acquirer;
  • whether the bank will be able to comply with its prudential supervision obligations on a continuing basis; and
  • whether there is any risk deriving from the proposed acquirer that is tied to any money laundering or terrorist financing activities.

The proposed acquirer must accompany notification to the BoG with specific questionnaires and supporting documentation specified in the BoG Executive Committee’s Act 142/2018 as amended by BoG’s Executive Committee’s Act 178/4/2.10.2020.

The corporate governance regime applicable to banks is primarily set out in the Banking Law and supplemented by the BoG Governor’s Act 2577/2006, as in force. In terms of Greek banks whose shares are listed for trade on the Athens Stock Exchange, Law 4706/2020 on the corporate governance of listed companies also applies, while the Sociétés Anonymes Law supplements the regulatory and corporate legal framework.

Pursuant to the Banking Law, banks are required to have:

  • robust governance arrangements, including a clear organisational structure with well-defined, transparent and consistent lines of responsibility;
  • effective processes to identify, manage, monitor and report the risks they are or might be exposed to;
  • adequate internal control mechanisms, including sound administration and accounting procedures;
  • remuneration policies and practices that are consistent with and promote sound and effective risk management; and
  • recovery plans.

Such arrangements, processes and mechanisms must be comprehensive and proportionate to the nature, scale and complexity of the risks inherent in the business model and the bank’s activities.

Along with the Banking Law, BoG Governor’s Act 2577/2006 sets out the following minimum corporate governance requirements that all banks should satisfy:

  • the BoD must consist of executive and non-executive members; at least one member – or two members if the value of the bank’s assets exceeds EUR10 billion – must be non-executive and independent, and the chairman of the BoD cannot assume the function of the bank’s CEO, unless an exemption is granted by BoG; and
  • subject to the bank’s size and the complexity of its activities, the BoD must be assisted by the internal audit committee, the risk management committee, the remuneration committee and other ad hoc committees (such as the nomination committee).

The following units, which are independent from one another, should be established:

  • an internal audit unit that reports to the internal audit committee;
  • a risk management unit that reports to the risk management committee and the BoD; and
  • a compliance unit that is subject to control by the internal audit unit; the compliance manager may also be appointed as an AML officer.

In addition, pursuant to BoG Governor’s Act 2577/2006, each bank should have an organisational structure and processes that ensure:

  • the appointment of officers authorised to communicate with the BoG and other authorities;
  • crisis management procedures are in place;
  • a business continuation (COB) plan is in place;
  • direct or indirect involvement of at least two employees in each activity (the "four eyes principle");
  • the separation of the duties and operations of the front line from the back office;
  • the involvement of the internal audit, compliance and risk management units in each product programme or significant business decision;
  • that the financing of BoD members or general managers takes place on an arm’s-length basis; and
  • the appointment of external auditors for the assessment of the internal audit system at least once every three years.

With regard to outsourcing requirements, the BoG recently issued Executive Committee’s Act 178/5/2.10.2020, adopting the guidelines of the European Banking Authority (EBA) on outsourcing arrangements and abolishing the existing framework for outsourcing, laid down in Annex 1 to BoG Governor’s Act 2577/9.3.2006.

Under the new framework, banks are required to inform the BoG of their intended arrangements for the outsourcing of critical or important functions before they enter into any outsourcing agreement, but without the need for a relevant BoG approval. However, where it is judged that the relevant supervisory requirements are not met, the BoG may decide not to allow the outsourcing of functions or may request the termination of any outsourcing agreement in force.

Furthermore, banks are obliged to maintain a register of information on all outsourcing agreements, which shall be made available to the BoG, upon request, along with any other information necessary for the exercise of effective supervision.

Regulatory Approval for BoD and Key Function Holders

Board members and the holders of a bank’s key functions are required to be of good reputation and to have adequate knowledge, skills and experience to be able to understand the bank's activities, including the main risks, and to act with honesty, integrity and independence.

To that end, pursuant to the BoG Executive Committee’s Act 142/11.6.2018 as amended by the BoG Executive Committee’s Act 178/2.10.2020, the bank must notify the BoG in writing of the appointment of a new board member, a key function holder or a AML/CTF Officer, completing and submitting the Annex II questionnaire: “Fit and proper assessment of members of the board of directors and key function holders”. The “fit and proper” assessment focuses on the suitability of the new appointed persons in relation to their duties, as well as their professional or family relations. This procedure does not replace the bank’s primary obligation to recruit competent and suitable executives.

If the persons to be appointed have already undergone a fit and proper assessment by the BoG or another supervisory authority in connection with duties related to regulated activities of the financial sector in accordance with EU or other equivalent law, the BoG may waive the assessment and simply require notification of the identity of either such persons or simply the regulated legal person, reserving the right of consultation with the relevant supervisory authority.

Following their approval by the BoG, board members are elected by the bank’s General Meeting of the Shareholders, pursuant to the provisions of the Sociétés Anonymes Law, and their tenure cannot exceed six years.

BoD’s Roles and Accountability

The BoD defines, oversees and is accountable for implementing the governance arrangements ensuring the bank’s effective and prudent management. To avoid any confliction of interests, the BoG deems it necessary for banks to adopt the international best practices and principles of corporate governance, particularly in respect of the segregation of the executive and supervisory functions of board members, including the segregation of the BoD chairman’s functions from the CEO’s executive functions.

The BoD is responsible for the consistent implementation of the following, among others:

  • the bank’s strategic orientation, the reassessment thereof, and the adoption of suitable policies aimed at ensuring an adequate and effective internal control system;
  • a suitable risk management policy, specifying the maximum risk exposure limits acceptable from time to time, as well as a regulatory compliance policy;
  • a Code of Ethics complied with by the bank’s management and its overall staff, on the basis of generally acceptable standards;
  • the assessment of the accuracy of the financial statements published annually and periodically by the bank and its group (if any), as well as the accuracy of the data submitted to the BoG and other regulatory authorities; and
  • the bank’s compliance with the legal framework, its internal regulations and corporate governance principles, taking into account the appropriate measures regarding the selection and replacement of officers in key positions, if necessary.

The Banking Law requires banks to have a remuneration policy that applies to board members. Such provisions are further supplemented by the Sociétés Anonymes Law, the BoG Governor’s Act 2650/2012, the BoG Executive Committee Act 158/2019 endorsing the EBA Guidelines on sound remuneration policies (EBA/GL/2015/22) and the BoG Governor’s Act 2577/2006, as amended. Pursuant to such provisions, the remuneration policy must be in line with the business strategy, objectives, values and long-term interests of the bank, and must incorporate measures to avoid conflicts of interest.

The non-executive board members must adopt and periodically review the remuneration policy and are responsible for overseeing its implementation, which must be reviewed at least annually by the bank’s internal audit unit.

Furthermore, staff engaged in control functions must be remunerated in accordance with objectives linked to their functions, independent of the performance of the business areas they control, while the remuneration of senior officers in the risk management and compliance functions must be directly overseen by the remuneration committee or the non-executive board members.

The remuneration policy must clearly distinguish between the criteria for setting basic fixed remuneration and those for variable remuneration, taking into account the national criteria on wage setting.

Banks must provide the BoG with information on remuneration, including the number of natural persons per institution that receive EUR1 million or more per financial year, as well as information on any gender pay gap.

Finally, Article 66 para. 1 of the Banking Law, which was recently amended, provides that the remuneration policies and practices established by the banks must be gender-neutral.

Banks must comply with the applicable AML/CTF framework, namely the AML/CTF Laws, BoG Banking and Credit Matters Decision 281/17.03.2009 and 290/12/11.11.2009 (the AML/CTF Decisions), FATF Recommendations including FATF Report on Covid-19-related AML/CTF Risks and Policy Responses, EBA guidelines and, finally, ministerial decisions, including the decision on the establishment of the National Beneficial Owners Registry.

In particular, the AML/CTF Decisions were initially supplemented by Banking and Credit Matters Committee Decision 300/30/28.07.2010 and subsequently by BoG Governor's Act 2652/29.2.2012 amending Banking and Credit Matters Committee Decisions 281/5/17.3.2009 and 285/6/9.7.2009; Credit and Insurance Committee Decision 94/23/15.11.2013, Executive Committee Act 172/2/29.5.2020 and Executive Committee Act 188/1/26.4.2021 (on eGov-KYC) further amended Decision 281/5/17.3.2009.

AML/CTF requirements include validating the transaction and identifying the parties thereto in order to eliminate any suspicions of questionable conduct or unknown, untraceable origins of assets. For this purpose, banks must establish appropriate AML/CTF policies and IT systems for the ongoing monitoring and detection of suspicious or unusual transactions and activities.

In the context of KYC application, the new Ministerial Decision 9747/2021 establishes the digital interconnection of credit and financial institutions with the e-Government platform by introducing a new online application for the implementation of e-KYC verification. This new application – eGov-KYC "Know Your Customer – Introduce Yourselves" – is accessed via the gov.gr platform maintained and operated by the General Secretariat of Information Systems of the Ministry of Digital Transformation and offers credit and financial institutions and their clients a secured, digitised and paper-free alternative to the KYC process carried out for AML due diligence and KYC purposes.

Further to the introduction of this application, the BoG Credit and Insurance Committee updated and amended AML Decision 281/17.3.2009, by virtue of Decision 188/26.04.2021. The application currently applies to and may only be used by individuals who have provided their express consent, so the use of the application currently remains optional. The operation of the eGov-KYC application smooths the path for the interconnection of corporate, tax and beneficial owner registries held with governmental and regulatory authorities, further simplifying identification procedures and reinforcing AML/CTF processes.

In view of the above, banks must apply due diligence measures to new and existing clients, high-risk individuals, Politically Exposed Persons (PEPs) and transactions executed without the client’s physical presence, among others. In principle, due diligence requirements apply in the following scenarios:

  • when carrying out an occasional transaction amounting to EUR15,000 or more, or in cases where the transaction constitutes a transfer of funds exceeding EUR1,000;
  • in the case of persons trading in goods, when carrying out occasional transactions in cash amounting to EUR10,000 or more, whether the transaction is carried out in a single or several operations that appear to be linked;
  • when there is a suspicion of money laundering or terrorist financing, regardless of any derogation, exemption or threshold;
  • when there are doubts about the veracity or adequacy of previously obtained data for the certification and verification of the identity of the customer or beneficial owner; and
  • for electronic money or special prepaid instruments with a maximum payment transactions limit exceeding EUR150 in both cases.

Banks must assess the business relationship and continue to monitor it on an ongoing basis, including scrutinising transactions, acting on the basis of risk assessment. Enhanced due diligence measures also apply when dealing with natural or legal persons established in third countries identified by the European Commission as being high-risk third countries, and when transactions or business relationships with PEPs are involved. In order to meet the due diligence requirements, banks are permitted to rely on third parties. Due diligence records must be kept for five years after the end of the business relationship with the client or for five years from the date of a transaction.

When identifying a suspicious transaction, banks must:

  • immediately report such transaction to the AML/CTF Authority (FIU);
  • immediately provide all information requested by the FIU or other supervising authorities; and
  • abstain from informing the client or any third party either that they have filed a report of a suspicious transaction or that they have received a request to provide information to any investigating authority.

Administrative sanctions are imposed in the event of a breach of AML/CTF obligations, including fines, cessation of business activities, suspension or withdrawal of operating licences and public announcement. The fine imposed may amount to EUR5 million, and an additional fine of up to EUR5 million may be imposed on board members, managing directors, managers or other employees.

To ensure compliance, the appointment of an AML/CTF Officer is required. Moreover, the allocation of responsibilities and duties to the persons and units involved in the bank’s transactions and operations must be clear in order to ensure effective implementation of AML/CFT policies, procedures and controls, and to achieve compliance with the AML/CTF framework.

AML/CTF obligations with respect to a parent credit institution are performed both by its subsidiaries in Greece and abroad, and by its branches and representative offices abroad, unless this is wholly or partly prohibited by the relevant foreign legislation, in which case the FIU and the BoG must be notified.

TEKE Administration

The Hellenic Deposit and Investment Corporation (TEKE) is the operator of the deposit guarantee and investment compensation schemes and the Resolution Fund for banks. TEKE is governed by Law 4370/2016 and supervised by the Greek Ministry of Finance.

TEKE is responsible for:

  • paying compensation to depositors if deposits become unavailable;
  • paying compensation to investor clients of banks when said banks become unable to fulfil their obligations towards such clients; and
  • financing resolution measures applied to banks.

ΤΕΚΕ is composed of three separate schemes:

  • the Deposit Cover Scheme (DCS) for coverage of depositors;
  • the Investment Cover Scheme for coverage of investor clients; and
  • the Resolution Scheme for the financing of resolution measures.

The three schemes are clearly distinct from each other and are separate property groups, each being solely earmarked for its respective purpose and serving such purpose in accordance with the provisions of the legislation in force.

Coverage by the DCS is compulsory for:

  • all Greek banks;
  • foreign branches of Greek banks; and
  • domestic branches of banks incorporated outside the EU.

It should be noted that branches of banks incorporated in another EU Member State do not participate in TEKE, as they are covered by the Deposit Guarantee Scheme of the respective country in which their registered office is located (home Member State).

DCS Funding

An initial contribution is required from banks joining the DCS and is payable within one month of the date on which they become members. New entrants to the DCS pay the initial contribution in three annual instalments by crediting the dedicated DCS account with the BoG. Regular contributions are paid annually. The key factors considered in the calculation of the annual regular contributions are the amount of covered deposits and the degree of risk assumed by each bank.

Extraordinary contributions are paid if the available DCS funds are not sufficient to compensate depositors. Extraordinary contributions must not exceed 0.5% of the covered deposits of each bank per calendar year. In exceptional circumstances, higher contributions may be specified by a decision of TEKE’s BoD with the consent of the BoG.

Extent of Coverage under the DCS

The DCS covers deposits held by natural persons or legal entities, irrespective of the currency, such as:

  • savings accounts;
  • sight deposits;
  • current accounts; and
  • time deposits.

However, the following deposits are excluded from DCS coverage:

  • deposits made by other banks on their own behalf and for their own account;
  • banks’ own funds;
  • deposits arising out of transactions in connection with which there has been a criminal conviction for AML/CTF; during the criminal proceedings, any compensation is suspended, until a final court ruling;
  • deposits by financial institutions;
  • deposits by investment firms on their own behalf and for their own account;
  • deposits whose holder or beneficiary has never been identified;
  • deposits by insurance and reinsurance undertakings;
  • deposits by collective investment undertakings;
  • deposits by social security and occupational pension funds;
  • deposits by public authorities as defined in Law 4270/2014;
  • debt securities issued by a bank and liabilities arising out of own acceptances and promissory notes; and
  • deposits by TEKE.

Compensation is paid in euros to beneficiaries of Greek banks, and in the currency of the country where the account is held with respect to depositors in foreign branches.

The maximum level of coverage under the DCS is EUR100,000 per depositor per bank (unless there is a case of additional coverage) for the total amount of their deposits, regardless of the number of accounts, including interest accrued by the date on which the deposit becomes unavailable. The reference date for the calculation of the repayable amount is the date on which the deposit becomes unavailable.

Any information, data and transactions pertaining to a client’s banking relationship are of a confidential nature and subject to a general professional duty of confidentiality. These confidentiality obligations of general application derive from the general duties of loyalty and confidentiality that banks owe to their clients. Secrecy restrictions arising from this general duty of confidentiality may be waived with the client’s consent or approval, to the extent that the relevant information does not relate to cash/securities deposits. While there are no specific rules that define such general duties of confidentiality on any banking transaction, deposits of any kind (both cash and securities) enjoy a higher degree of protection. Greek legislation has followed a stricter approach towards the latter, prohibiting disclosure in any manner by threatening criminal sanctions for violation.

In particular, the Greek Bank Secrecy Law (Legislative Decree 1059/1971) covers deposits of any kind (cash and securities), prohibiting the disclosure of deposit-related information to third parties, even if the holders of the respective accounts have given their consent. The Greek Bank Secrecy Law applies to all banks operating in Greece, including foreign banks operating through a local establishment.

Banking secrecy obligations do not apply towards the BoG and solely for the purpose of exercising its competencies related to banking supervision/regulation and to the implementation of monetary, financial and foreign currency rules. Moreover, banking secrecy is lifted in cases explicitly provided for in the law (eg, tax evasion).

The obligation to keep the confidentiality of deposits is imposed primarily over those persons who have access to clients’ accounts when performing their duties or assignments. In compliance with the generally acceptable principle of proportionality, these persons should not obtain more information than is actually needed in order to perform their duties. Any unnecessary disclosure, such as granting access to persons with duties not related to the bank accounts, should be avoided even within the operation and structure of a banking organisation.

Any breach may result in imprisonment for at least six months, and civil liabilities towards the relevant account holders may be invoked. Authorisation or approval by the depositor benefiting from a bank's secrecy obligation does not revoke the punishable nature of the disclosure of information on deposits.

Capital Adequacy

The CRR and the CRD IV and V implementing the Basel III global regulatory standards on capital adequacy and liquidity provide the vast majority of the capital adequacy requirements applicable to banks. Specific liquidity requirements may be imposed by the BoG if considered necessary. There is a leverage ratio applicable to all banks, which is calculated in accordance with the methodology set out in Article 429 of the CRR. Moreover, CRD IV and V provide for controls related to the measurement, monitoring and management of undertaken risks, coupled with detailed disclosure requirements (Pillar III). Within this framework, the following applies:

  • emphasis is given to Common Equity Tier 1 (CET 1) capital;
  • the following capital adequacy minimum requirements are defined:
    1. for the CET 1 ratio, a minimum threshold of 4.5%;
    2. for the Tier 1 ratio, a minimum threshold of 6%; and
    3. for the Total Capital ratio, a minimum threshold of 8%;
  • banks maintain capital buffers comprising CET 1 capital;
  • banks monitor credit valuation adjustment (CVA) risk and maintain adequate capital;
  • banks monitor central counterparty (CCP) risk;
  • banks calculate a leverage ratio, for monitoring excessive leverage; and
  • banks calculate a Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for monitoring liquidity risk.

On top of the above requirements, the Banking Law (Articles 121-130) has, following Basel III, introduced the necessary capital buffers:

  • a capital conservation buffer equal to 2.5% of total risk exposure amount calculated in accordance with Article 92(3) of the CRR;
  • an institution-specific countercyclical capital buffer of an amount calculated in accordance with Article 92(3) of the CRR multiplied by the weighted average of the countercyclical buffer rates; and
  • a systemic risk buffer of CET 1 of 1% to 3%, based on the exposures to which the systemic risk buffer applies, can be introduced by the BoG for the financial sector or one or more subsets of that sector, in order to prevent and mitigate long-term non-cyclical systemic or macro-prudential risks not covered by the CRR.

The global systemically important institutions (G-SIIs) buffer is mandatory for banks that are identified by the relevant authority as G-SIIs, to compensate for the higher risk they pose to the global financial system and for the potential impact of their failure.

The S-GII mandatory buffer ranges between 1% and 3.5% of CET 1 capital of risk-weighted assets, depending on the systemic importance of the institution. Said buffer is maintained in addition to the following:

  • the own funds requirement under CRR (Article 92);
  • the capital conservation buffer requirement;
  • any other own funds requirement; and
  • any institution-specific countercyclical capital buffer requirement (currently set at 0% for the fourth quarter of 2021 per BoG Executive Committee’s Act 193/3/27.09.2021).

Each other systemically important institution (O-SII) may be required by the BoG, on a consolidated, sub-consolidated or individual basis, to maintain an O-SII buffer of up to 3% of the total risk exposure amount calculated in accordance with the CCR (Article 92). Subject to the authorisation of the European Commission, the BoG may require each O-SII, on a consolidated, sub-consolidated or individual basis, as applicable, to maintain an O-SII buffer higher than 3% of the total risk exposure amount calculated in accordance with Article 92(3) of CRR.

Where an O-SII is a subsidiary of either a G-SII or an O-SII that is an EU parent institution and subject to an O-SII buffer on a consolidated basis, the buffer that applies at the individual or sub-consolidated level for the O-SII must not exceed the lower of:

  • the sum of the higher of the G-SII or the O-SII buffer rate applicable to the group on a consolidated basis and 1% of the total risk exposure amount calculated in accordance with Article 92(3) of CRR; or
  • 3% of the total risk exposure amount calculated in accordance with Article 92(3) of the CRR, or the rate the European Commission has authorised to be applied to the group on a consolidated basis.

In addition, the Banking Law requires a minimum paid-up initial capital of:

  • EUR18 million for Greek banks;
  • EUR9 million for branches of third-country banks; and
  • EUR6 million for Greek credit co-operative banks.

These thresholds may be adjusted by the competent authority to amounts of no less than EUR5 million.

The BRRD is part of the Single Rulebook – ie, the CRR, CRD IV and V, the BRRD I and II and Directive 2014/49/EU (Deposit Guarantee Schemes Directive or DGSD) – which sets a uniform regulatory framework for credit and financial institutions operating in the EU for the purpose of completing the single market in financial services. Specifically, BRRD governs the EU financial services market and establishes a reference framework for the recovery and resolution of credit institutions and investment firms.

Designation of National Resolution Authorities and Funds

The national resolution authorities designated by virtue of the BRRD Law are the BoG (with respect to credit institutions) and the HCMC (with respect to investment firms).

The Resolution Scheme of TEKE is designated as the national resolution fund for ensuring the effective implementation of the resolution tools in respect of banks. As far as investment firms are concerned, the respective functions are performed by the Athens Stock Exchange Members’ Guarantee Fund.

The national resolution authorities are granted a wide range of resolution powers, including the power to request from all supervised institutions any available information, to carry out dawn raids and to impose fines and administrative sanctions. In discharging their duties, the national resolution authorities will work further in close co-operation with their counterparts at EU level, namely the Single Recovery Mechanism and the Single Recovery Fund.

Resolution Measures

Pursuant to the BRRD Law, the BoG has been designated as the national resolution authority with respect to Greek banks, and the Resolution Scheme of TEKE has been designated as the national resolution fund.

The powers provided to said competent Greek authorities are divided into three categories:

  • preparation and prevention, with preparatory steps such as recovery plans, while the BoG prepares a resolution plan for each bank;
  • early intervention, with predetermined measures at an early stage so as to avoid insolvency; and
  • resolution, if the insolvency of an institution presents a concern with regard to general public interest.

In the context of the BRRD Law, the BoG has the power to apply a set of resolution tools individually or in combination if certain trigger conditions for resolution are met, as follows:

  • the determination that the bank is failing or is likely to fail;
  • there is no reasonable prospect that any alternative private sector measures or supervisory action taken in respect of the bank would prevent the failure of the latter within a reasonable timeframe; and
  • a resolution action is necessary in the public interest.

Said resolution tools are as follows:

  • the sale of business;
  • the bridge institution,
  • the asset separation (which may be used only in conjunction with other tools); and
  • the bail-in tool.

Additionally, in adverse conditions of a systemic crisis, extraordinary public financial support may be provided through (additional) financial stabilisation tools, which consist of public equity support and temporary public ownership (Articles 57 and 58 of the BRRD Law).

The application of the above measures is subject to certain conditions and requirements, whereas, for the purposes of selecting the appropriate tool, the national resolution authorities should take a wide range of factors into consideration (eg, the feasibility and the credibility of the bank in resolution).

The Bail-in Tool

In brief, use of the bail-in tool in the context of a potential recapitalisation of a bank means that financial assistance will be drawn from the national resolution fund for the restructuring of such bank's liabilities.

Pursuant to Article 44 of the BRRD Law, applying the bail-in tool to draw funds from TEKE in favour of a Greek bank requires that:

  • a contribution to loss absorption amounting to at least 8% of the total liabilities of the bank (including own funds) is made by common shareholders, holders of other instruments of ownership, holders of capital instruments and holders of other eligible liabilities, and takes effect through write-down, conversion or otherwise; and
  • the contribution of TEKE does not exceed 5% of the total liabilities of the bank (including own funds).

Bank deposits that undergo a recapitalisation procedure are guaranteed up to EUR100,000; under exceptional circumstances, uninsured (eligible) deposits held by natural persons or small and medium-sized enterprises might be excluded in whole or in part from the application of write-down or conversion powers.

Ranking of Claims

By virtue of the BRRD Law, as in force, a new Article 145A was introduced into the Banking Law, determining the ranking of claims upon the special liquidation of a bank. More specifically, in accordance with Article 145A, as amended by virtue of Laws 4340/2015, 4346/2015, 4438/2016 and 4799/2021, the following claims are ranked preferentially in the following order:

    1. claims under Article 975(3) of the Greek Code on Civil Procedure;
    2. Greek State claims arising in the recapitalisation by the Greek State of banks pursuant to Article 57 or 58 of the BRRD Law;
    3. claims deriving from guaranteed deposits or TEKE;
    4. any type of Greek State claim aggregated with any surcharges and interest charged on these claims;
    5. claims of the resolution fund, in the provision of financing to the institution;
    6. claims deriving from eligible deposits to the extent that they exceed the coverage threshold for deposits of natural persons and micro, small and medium-sized enterprises;
    7. claims deriving from investment services that are covered by TEKE;
    8. claims deriving from eligible deposits to the extent that they exceed the coverage limit and do not fall under claims of the resolution fund or claims deriving from eligible deposits;
    9. claims deriving from deposits exempted from compensation pursuant to Article 12 of Law 4370/2016, but not including deposits falling under point 2 of the article;
    10. all claims that do not fall within the above listed points and are not subordinated claims as per the relevant agreement, including indicative liabilities under loan agreements and other credit agreements, agreements for the supply of goods or agreements for the provision of services or from derivatives;
    11. claims deriving from debit instruments issued by credit institutions subject to the following:
      1. their initial contractual term is determined to at least one year;
      2. they do not incorporate derivatives and they are not derivatives; and
      3. their relevant contractual documentation (including prospectus) classifies them as falling under point j) above; and
    12. claims deriving from subordinated debt instruments or tier 2 instruments or hybrid securities or additional tier 1 instruments or preferred shares or common shares, capital instruments of tier 1 common shares issued by the credit institution subject to the classification between the ranking of the claims falling under point k) above.

New Bankruptcy Code

After a protracted incubation period, the Bankruptcy Code (BC) was voted in by the Greek Parliament (ie, Law 4738/2020 on “Debt settlement and second chance providence”), codifying all debt settlement legislative tools. The BC came into effect on 1 January 2021, profoundly reforming the insolvency legislation currently applicable in Greece while transposing into Greek law EU Directive 2019/1023 on preventive restructuring frameworks and second chances. The BC brings significant changes to the current legal framework, as it extends for the first time the notion of “bankruptcy” to individuals who do not undertake commercial activity. The new BC provides for swifter judicial procedures, the recognition and protection of the rights of collateral holders, the creation of an electronic register of bankruptcies, early measures for dealing with insolvency and, most importantly, the interconnection of all electronic databases of banks and the tax authorities to allow an accurate appraisal of the true estate of debtors.

Non-performing Loans

In 2019, the fundamentals and prospects of the Greek economy improved, including in respect of non-performing loans (NPLs), positively affecting the financial system. However, the COVID-19 pandemic crisis disrupted global financial stability and reversed the growth prospects of the Greek economy for 2020, which until then had been benign.

In particular, the COVID-19 pandemic drove the economy into a deep recession and triggered shocks in the financial system. To this end, a series of measures enacted by the authorities (ie, the Greek government, the ECB and the SSM) and examined in practice largely curbed the impact of the pandemic.

Important initiatives by Greek banks and the government through the implementation of the Hellenic Asset Protection Scheme (HAPS) definitely contributed to a reduction in the NPL ratio. However, this ratio is still a multiple of the European average, without taking into account any new NPLs that will emerge as a result of the COVID-19 crisis. In this context, banks are expected to expedite the recognition of any new NPLs in their balance sheets as COVID-related support measures begin to be phased out.

In any case, the high stock of NPLs and the quality of prudential own funds remain the biggest challenges facing the financial system, along with a stronger bank-sovereign nexus. Therefore, vigilance and further initiatives on NPL resolution and strengthening capital quality should remain a priority in order to mitigate risks and boost credit supply to the real economy.

Compliance with COVID-19 Measures

The current health crisis has forced banks to comply with a number of anti-COVID-19 measures and amend their policies and procedures accordingly while taking digitalisation initiatives. Such measures include:

  • the establishment of procedures for social distancing and remote working (smart working); and
  • the implementation of thermal cameras and the testing of body temperature procedures.

The implementation of these measures has had a significant impact on banks’ data protection policies, which must be amended accordingly to reflect the new requirements while maintaining the enhanced confidentiality and data protection obligations required pursuant to the provisions of the General Data Protection Regulation (EU/679/2016) and Law 4624/2019 in implementation thereof.

Moratis Passas

Voukourestiou 15
10671
Athens
Greece

+30 2103 606 107

+30 2103 636 516

maria.androulaki@morpas.gr www.moratispassas.gr
Author Business Card

Trends and Developments


Authors



Zepos & Yannopoulos is a leading Greek law firm known for its long heritage, legal acumen and integrity. As a full-service business law firm, it takes pride in its distinctive mindset and offering, which enable it to field versatile and approachable teams of practitioners who truly understand clients’ interests. The firm's strong international orientation is echoed in its structure, standards and approach, in the profile of its client base, and in its network of affiliations and best-friend law firms around the world. Established in 1893, the firm is cognisant that change – whether in the legal or economic environment – is inherent to the jurisdiction, and is accustomed to implementing untested legislation, structuring innovative solutions and putting bold legal argumentations to the service of clients. It advises corporations from all commercial and industrial sectors, financial institutions, non-profits, start-ups and high net worth individuals, working closely with regulators and all major professional service firms.

Alternative Finance – Buy Now, Pay Later

With the COVID-19 outbreak and the ensuing economic crisis, the need for businesses and consumers to gain access to alternative finance methods has become stronger across the world. In Greece, it is practically impossible for small businesses (especially start-ups) and consumers with no credit history to gain access to traditional bank lending. Due to regulatory restrictions, credit institutions have tightened their credit standards for granting loans to enterprises and households, in order to limit their non-performing exposures and become more resilient during and after the pandemic. The need for alternative methods of finance combined with the rapid growth of e-commerce and the evolution of fintech has led to the development of innovative digital financial products offered through online platforms.

One of the fastest growing trends right now in the fintech area is “buy now, pay later”, or BNPL, which is offered as a payment option by retailers at the point of sale. More specifically, BNPL is a form of interest-free credit that allows consumers to make online purchases without using a credit card or, in general, traditional lending methods, rather giving them the ability to defer payment to a later date or splitting such amount into three or four interest-free instalments. BNPL is a merchant-driven product, since the costs are passed on to merchants that choose to partner with BNPL providers and incorporate this payment method at the checkout point in order to increase the sales volume of their products or services and provide consumers with another customer-friendly payment method.

The biggest benefit of BNPL for consumers is that the entire process is much easier than the granting of credit by a traditional bank. Once a consumer chooses to pay through BNPL, they can instantly find out whether their application is approved and what their payment plan is. While banks require a high credit score and multiple years of credit history, BNPL providers turn to other methods to evaluate consumers’ trustworthiness, using their technology and the Open Banking system or other firms to assess the possibility of consumers failing to repay a BNPL product and therefore to assess the credit risk to which a BNPL provider is actually exposed.

Depending on the BNPL model, the offering of this product to consumers may have no impact on customers’ credit score, and most BNPL providers do not report missed payments to credit bureaux. In addition, unlike banks, BNPL providers do not require any form of collateral and do not charge fees to the consumer but obtain commission only from the merchant/seller. In BNPL, consumers are usually only subject to late payment fees (or reminder fees) if they fail to follow the agreed payment plan. BNPL creates new opportunities overall, and makes financial access available to consumers who previously had limited options to obtain credit.

For merchants, the main benefit is the increase in their sales volume, since BNPL entices consumers to make purchases that would not otherwise fit into their budget without any impact on the cashflow of the merchant. BNPL providers usually pay the merchant upfront and take on the credit risk of the consumers.

BNPL has been booming globally, especially in the United States and Europe. The outcome of global surveys carried out last year shows that many consumers used BNPL due to COVID-19 restrictions, that half of the users have missed a BNPL payment (this may be the case when consumers buy an item outside of their budget) and that many retailers are not able to understand whether this product is a credit. One of the key reasons BNPL has been able to grow so rapidly is that this sector is very lightly regulated in most countries.

In Greece, BNPL is currently emerging; although consumers have showed an increased inclination towards electronic payments, BNPL has not yet invaded the Greek market. According to the financial stability review published by the Bank of Greece in June 2021, the use of electronic means of payment in Greece during 2020 was elevated in terms of both volume and value of transactions, despite the decline in transactions carried out with the use of payment cards in the first half of 2020. However, BNPL providers targeting consumers in Greece should bear in mind that this will most probably qualify as a regulated activity in Greece.

BNPL in Greece: Regulatory Treatment

Under Greek law, the provision of loans or other credits is, in principle, a regulated activity when it is carried out in a professional capacity. Such activity is restricted only to credit institutions and certain financial institutions (ie, credit companies, factoring companies and leasing companies, depending on the exact scope of services) that are authorised by the Bank of Greece or by the competent authority of the EU home Member State and have exercised their right under the EU passport to provide services in Greece either cross-border or through the establishment of a branch. Deviations from this rule are explicitly set out in the law, in an exclusive manner. For example, intra-group lending or the provision of credit by the merchants to consumers for the purchase of said merchants' products or services is specifically exempted from the licensing requirement.

The main legal query around BNPL is whether or not it actually entails the provision of credit in a professional capacity. Legal doubts are raised since the provision of credit by BNPL providers is usually granted free of interest and without any consideration or other charges for the buyer. In this respect, a legal argument can be made that the provision of credit by the BNPL provider is not carried out in a “professional capacity”, since the BNPL provider does not provide credit against a consideration. This argument has not been tested in practice before the Greek courts, and the Bank of Greece has not yet expressed an official view thereon. The argument could be said to be weak because, despite the provision of credit to consumers free of charge, BNPL providers are actually receiving a consideration for their activity but such consideration is simply the fee/commission that is passed on to merchants.

In addition, depending on how each BNPL product operates as regards the relationship between the BNPL provider and the merchant, the BNPL provider may be deemed to be carrying out factoring activities to the extent it acquires the merchant's receivable arising from the purchase order and has a direct claim against the buyer thereunder. Although factoring services are usually provided in relation to claims from invoices, the factoring of consumer claims is also possible. However, unlike in other EU Member States, factoring is a regulated activity in Greece and is restricted only to licensed credit institutions or factoring companies.

On the basis of the above, a BNPL provider wishing to initiate business in Greece will be required to be a licensed entity, in principle. The type of the licence will depend on the specific activities and the contractual relationships with the consumers on the one hand and with the merchants on the other. It might also be the case that BNPL providers will elect to establish only the platform and the algorithms to facilitate the BNPL system without granting credit to consumers themselves but on the basis of co-operation with other credit providers.

In general, the provision of credit in Greece by non-licensed entities triggers not only regulatory concerns but other legal concerns as well. More specifically, usury restrictions apply to credit agreements entered into by legal entities other than credit or financial institutions. The maximum permissible non-bank contractual interest rate currently applicable is 5.25%. This is not applicable to credit or financial institutions, which may freely determine the interest rate they offer to their clients. In addition, stamp duty of 2.4% or (more rarely) 3.6% will, in principle, be applied on the principal/interest of credit agreements concluded by unlicensed entities in Greece.

Finally, depending on their establishment and authorisation, BNPL providers will be subject to obligations arising from the anti-money laundering rules and will in any case need to observe and comply with the applicable consumer protection law requirements in Greece.

BNPL: Concerns for Consumers

BNPL products offer upfront credit to consumers with zero or low fees. It is therefore likely that an increasing number of instalment repayments will move away from card transactions and traditional lending offered by credit institutions, while consumers (especially millennials) will choose the BNPL method at the checkout point. In addition, depending on the BNPL provider, taking a BNPL credit will usually have no impact on customers’ credit score.

While BNPL products have gained momentum along with a surge in e-commerce during the COVID-19 pandemic, concerns have been raised by EU regulatory authorities over whether such products can be offered to clients by unregulated entities. Although BNPL seems to be beneficial to consumers overall and seems to be boosting retail sales, states will need to ensure that consumers are adequately protected when making use of this payment method. This demand is becoming more and more relevant across the EU Member States, since there is no harmonised approach at an EU level as to whether lending activities are regulated and under which conditions, and new players have already established a presence in the EU and wish to expand their activities into the Greek market.

BNPL is coming under closer scrutiny from the regulators because, in most cases, it seems to be exempt from the consumer credit legislation (ie, Directive 2008/48/EC on credit agreements for consumers – the Consumer Credit Directive). Interest-free loans that are granted without any other charges are explicitly beyond the scope of the Consumer Credit Directive as transposed into Greek law, as is credit that has to be repaid within three months where only insignificant charges are payable – this usually encapsulates BNPL products.

The key concern, however, is whether BNPL encourages consumers to become overburdened with debt by promoting irresponsible lending. This is particularly the case where BNPL providers conduct a soft credit check to assess the credit risk of the consumer, as explained above, rather than a proper creditworthiness assessment where the key element is the customer’s ability to make repayments as they fall due (and therefore to assess the affordability of the product to consumers).

In June 2021, the EU Commission issued a proposal for a revision of the Consumer Credit Directive, which aims to adjust the current legal framework to cover new digital lenders and new online payment facilities (including providers of crowdfunding credit services) and to reduce the risks that consumer are facing (including consumers’ over-indebtedness). The relevant studies that have been published in that respect showed that zero-interest loans may foresee high fees for late or missed payments, of which consumers are often not aware. They also promote quick decisions, especially when they are offered to consumers at the point of sale. In addition, small loans can still entail important risks, not least because they are more likely to be used by vulnerable consumers and offered in the form of high-cost credit, such as payday loans (a type of short-term high-cost credit), credit cards or revolving credit.

The proposal for the revision of the Consumer Credit Directive intends to bring BNPL products within the scope of the regulatory perimeter. As a consequence, BNPL providers will be subject to the disclosure obligations set out in the consumer credit legislation and will need to perform proper creditworthiness assessments on their clients prior to engaging in the granting of credits.

Conclusion

BNPL is expected to be widely used in Greece, as in other EU countries, as a new payment method in the continuously expanding ecosystem of digital financial products. It is likely to prove beneficial not only to consumers and retail merchants but to the economy in general. However, in the absence of an EU level playing field with respect to the regulatory treatment of BNPL, when drawing their business plans for Greece, BNPL providers will need to be aware of, and factor in, the cost of complying with Greek legislation on consumer lending.

Zepos & Yannopoulos

280 Kifissias Ave.
152 32 Halandri
Athens
Greece

+30 21 0696 7000

info@zeya.com www.zeya.com
Author Business Card

Law and Practice

Authors



Moratis Passas advises many key firms in the Greek banking and financial market. It is widely recognised for its leading banking, capital markets, finance and regulatory expertise, which, together with its multi-jurisdictional capacity, enables the firm to provide an international perspective coupled with an understanding of local clients’ needs. Moratis Passas often acts for clients from around the world on high-profile and complex financial transactions and projects. It has extensive experience and a proven track record in M&A, securitisation projects, joint ventures, shareholders’ agreements, and company and partnership formations, as well as general corporate governance, representation and day-to-day business matters.

Trends and Development

Authors



Zepos & Yannopoulos is a leading Greek law firm known for its long heritage, legal acumen and integrity. As a full-service business law firm, it takes pride in its distinctive mindset and offering, which enable it to field versatile and approachable teams of practitioners who truly understand clients’ interests. The firm's strong international orientation is echoed in its structure, standards and approach, in the profile of its client base, and in its network of affiliations and best-friend law firms around the world. Established in 1893, the firm is cognisant that change – whether in the legal or economic environment – is inherent to the jurisdiction, and is accustomed to implementing untested legislation, structuring innovative solutions and putting bold legal argumentations to the service of clients. It advises corporations from all commercial and industrial sectors, financial institutions, non-profits, start-ups and high net worth individuals, working closely with regulators and all major professional service firms.

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