As it is well known, the dramatic events of the summer of 2015 have led to the imposition of capital controls re banking transactions in Greece. In essence, transfer of funds abroad is forbidden, unless a special permission is granted.
Capital controls are still in place but have been regularly alleviated by a series of amendments and as of the 1st of October 2018 do not apply to individuals accessing their accounts in Greek banks.
What is the legal framework governing the provision of banking services in Greece?
Law No. 4261/2014 on Credit Institutions, implemented Directive 2013/36/ EC of the European Parliament and Council into Greek law and regulates the establishment and operation as well as the supervisory status of credit institutions.
The Greek supervisory framework draws heavily on the relevant Community legislation, which is in turn consistent with the Basel principles. Specifically, Law 4261/2014 and Bank of Greece Governor’s Acts 2661/2012, 2630/2010, 2634/2010, 2635/2010, 2588/2007, 2589/2007, 2590/2007, 2646/2011, 2592/2007, 2645/2011, 2594/2007 and 2595/2007 make up the supervisory framework, while Bank of Greece Governor’s Acts 2577/06, 2595/2007 and 2597/2007, deal with the issue of the Internal Control Systems (ICS), including auditing, compliance and risk management functions, as well as with Pillar 2 (ICAAP and SRP) and other matters. Similarly, Banking and Credit Committee decisions, 281/5/26.3.2009, 285/6/2009 and 290/12/2009 constitute the institutional framework for the prevention of the use of the financial system for money laundering and the financing of terrorism. More specifically, Law 4261/2014 (hereinafter the “Law”) provides for, a) the establishment and operation of the business of credit institutions b) the activities of the credit institutions and c) the supervision on credit institutions and their activities.
The provision of investment banking services in the Greek banking sector is governed by Law 4514/2018 transposing Directive 2014/65/EU (“MiFID II”) into the Greek legal system”.
Which activities may be considered banking activities under Greek law?
According to article 3 of the Law, credit institutions are undertakings whose business is to receive deposits or other repayable funds from the public and to grant loans or other credit for their own account.
Furthermore, art. 11 of the Law, stipulates the activities of the credit institutions as follows:
- Acceptance of deposits and other repayable funds;
- Lending including, inter alia: consumer credit, mortgage credit, factoring with or without recourse, financing of commercial transactions (including forfeiting);
- Financial leasing;
- Money transfer services;
- Issuing and administering means of payment (e.g. credit cards, travelers’ cheques and bankers’ drafts);
- Guarantees and commitments;
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Trading for own account or for account of customers in:
• Money market instruments (cheques, bills, certificates of deposit, etc.);
• Foreign exchange;
• Financial futures and options;
• Exchange and interest rate instruments; or
• Transferable securities. - Participation in securities issues and the provision of services related to such issues;
- Advice to undertakings on capital structure, industrial strategy and related questions and advice on mergers and purchase of undertakings;
- Money broking;
- Portfolio management and advice;
- Safekeeping and administration of securities;
- Credit reference services;
- Safe custody services.
What are the various ways under which these banking activities may be provided in Greece by entities coming from the EU?
All the activities mentioned above, also included in Annex 1 of Directive 2006/48 of the EC, can be freely exercised by credit institutions of any Member State, either by the establishment of a branch, or by way of provision of services without establishment (cross border), and provided of course that they are regulated in their home member state.
The management and transfer of claims from Non-Performing Loans (NPLs) has become a quasi-banking activity (performed by specific banking-type companies and supervised and authorized by the Bank of Greece) by virtue of Law 4354/2015 as amended by Laws 4389/2016, 4393/2016, 4472/2017 and 4549/2018.
How is the freedom to provide services in accordance with EU Law being implemented under Greek law?
According to articles 49-55 of the EU Treaty, the citizens of a member state can provide services to other member states freely.
Greek Law 4261/2014 in implementation of the Directive 2013/36/EC, regulates the freedom to provide services in Greece by entities established in other member states. According to art. 38, any credit institution of another Member State wishing to exercise the freedom to provide services by carrying on its activities within the Greek territory for the first time, should meet the following requirements:
- It must have received a license to operate in another member state and must be supervised by the competent authority of the other member state.
- The activities that the credit institution intends to carry on in the Greek territory should be included in its operation license.
- The credit institution of another Member State must notify the competent authorities of the home Member State, of the activities on the above list which it intends to carry on. The competent authorities of the home Member State shall, within one month of receipt of the above notification send that notification to the competent authority of Greece, i.e. the Bank of Greece This is a direct consequence of the “Single license system
- Τhe credit institutions should comply with the rules of the Greek territory in connection with banking legislation as well as legal rules that have been adopted in the interests of the general interest.
- The credit institutions advertising their services through all available means of communication in the Greek territory are subject to any rules governing the form and the content of such advertising adopted in the interests of the general interest.
The competent authority of the home member state must only notify to the Bank of Greece the credit institution’s intention to provide cross border mutually accepted services in Greece. Such activities should be provided in the same manner as they are provided in their home country, and they should not violate the provisions of the legislation on credit institutions, capital market and consumer protection that aim at protecting investors and consumers of banking products and services or other provisions of public interest.
How is the provision of banking services in Greece by credit institutions of other member states regulated?
The Bank of Greece, pursuant to Article 55A of its Statute, (Law 3424/7 December 1927) exercises prudential supervision over credit institutions. The object of such supervision is to ensure the stability and efficiency of the banking system and, more generally, the smooth operation and stability of the Greek financial system. Τhe Department for the Supervision of Credit and Financial Institutions of the Bank of Greece is responsible for the prudential supervision of credit and financial institutions.
The provisions of art. 25 of Law 3106/2007, regulate the supervision of credit institutions and their activities. The Bank of Greece supervises the credit institutions with registered seat in Greece, and their branch offices in abroad, as well as the branch offices in Greece of credit institutions of third countries. In contrast, branch offices of credit institution of other member states, are supervised by the competent authority of the home member state except a) the supervision of their cash flow which is also supervised by the Bank of Greece in cooperation with the authority of the home member state and b) the supervision that their activities are provided in the same manner as they are provided in their home country, and that they do not violate the provisions of the Greek legislation.
Especially the provision of cross border services by credit institutions authorized in other member state in Greece, is only supervised by the competent authority of the home member state. According to art. 16 of Law 3106/2007, credit institutions authorized in other member states which are pursuing activities listed in art. 11 of Law 3106/07 as above, through provision of services without establishment in Greece, may pursue these activities in the same manner as in their home country, provided they do not violate the provisions of the legislation on credit institutions, capital market and consumer protection or other provisions of public interest.
Furthermore, the above credit institutions may advertise the services provided by them, subject to the provisions in force in Greece governing the type and content of such advertisement with a view to supplying sufficient and correct information to the public. The Bank of Greece within the scope to control the transparency and conditions of transactions may require adjustments to the content of the advertisements.
What are the potential measures and penalties on credit institutions authorized in other member states in case of breach of their obligations?
According to the art. 45 of Law 4261/2014, where the Bank of Greece on the basis of information received from the competent authorities of the home Member State under Article 51 ascertains that a credit institution having a branch or providing services in Greece fulfils one of the following conditions in relation to the activities carried out in Greece, it shall inform the competent authorities of the home Member State:
- the credit institution does not comply with the provisions of this Law or with Regulation (EU) No 575/2013;
- there is a material risk that the credit institution will not comply with the provisions of this Law or with Regulation (EU) No 575/2013.
After this information, the competent authorities of the home Member State shall, without delay, take all appropriate measures to ensure that the credit institution concerned remedies its non-compliance or takes measures to avert the risk of non-compliance. The competent authorities of the home Member State shall communicate those measures to the competent authorities of the host Member State without delay. The provisions mentioned above shall apply accordingly where the Bank of Greece acts in the capacity of competent authority of the home Member State of a credit institution having a branch in another Member State or a credit institution providing services in another Member State.
Where the Bank of Greece, as competent authority of the host Member State, considers that the competent authorities of the home Member State have not fulfilled their obligations or will not fulfil their obligations pursuant to para. 2, it may refer the matter to EBA and request its assistance in accordance with Article 19 of Regulation (EU) No 1093/2010. Where EBA acts in accordance with that Article, it shall take any decision under Article 19(3) of that Regulation within twenty-four (24) hours. EBA may also assist the competent authorities in reaching an agreement on its own initiative in accordance with the second subparagraph of Article 19(1) of that Regulation.
However, before following the procedure set out in Article 45, the Bank of Greece may, as competent authority of the host Member State, in emergency situations, pending measures by the competent authorities of the home Member State or reorganisation measures referred to in Article 3 of Directive 2001/24/EC, take any precautionary measures necessary to protect against financial instability that would seriously threaten the collective interests of depositors, investors and clients in the host Member State.
Are there any consumer protection provisions that those active in the banking sector in Greece should follow?
Credit institutions must abide by Greek consumer protection and advertising legislation.
The most important provisions of the Greek legislation on Consumer Protection and Advertising are:
- The general provisions of the Greek Civil Code (in particularly the articles GCC 57, GCC 281 and GCC 288), and Law 2251/1994 on Consumers’ Protection establish a regulatory framework shelter for consumers against creditors’ behaviours, being described as abusive and unfair.
- Law 2251/1994, stipulates that contracts - including the contracts within the financial services market – must not contain unfair terms. This law protects consumers’ economic interests vis-a-vis a potential abuse of power by the suppliers of financial services.
More specifically the law protects consumers from the standard contracts prepared by financial institutions that sometimes exclude essential rights of consumers. Such generLambadarios al transaction terms (GOS) (i.e. terms that have been made in advance for an indefinite number of future contracts), are prohibited and void, if they result in excessive imbalance of rights and obligations of the parties to the detriment of consumers.
Enhanced consumer protection provisions regarding the provision of investment banking services are also to be found in Regulation No. 600/2014 (“MiFIR”) and Law 4514/2018 transposing Directive 2014/65/EU (“MiFID II”) into the Greek legal system.
Greek courts have already issued a number of important decisions on unfair terms used by credit institutions. For example, a) terms, which give the financial supplier the right to alter unilaterally basic terms of a contract b) a term that limits the liability of the banks only for fraud or gross negligence of its employee, excluding in this way the responsibility for tight negligence, c) a term that imposes a cost of inactivity in deposit accounts, or d) a term authorizing the supplier to dissolve the contract in case there is some delay in the repayment of the credit, have already been characterized by the courts as unfair and thus void.
Corporate governance rules for Greek banks are to be found in the banking law and also Law 3016/2002. Enhanced consumer protection provisions regarding the provision of investment banking services are also to be found in Regulation No. 600/2014 (“MiFIR”) and Law 4514/2018 transposing Directive 2014/65/EU (“MiFID II”) into the Greek legal system.
