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Victoria Mindova

The Hellenic Chamber of Commerce considers the unification of the 13 cooperative banks in the country a new way to provide funding for the real economy. The Greek Trade Union, the Union of Small and Medium Enterprises and the Union of Cooperative Banks of Greece issued a joint proposal for all cooperative banks to merge under the management of Panellini bank.

"The new structure can allow small- and medium- sized enterprises to take a breath," said Vassilis Korkidis, who is one of the supporters of the creation of the new bank. Cooperative banks have open lines of funding from the European Bank for Investments as well as available funds that are currently lacking in the market. The regulatory restructuring of the system will allow lending them as soft loans.

"This involves granting preferential micro-loans of up to 10,000 euro to newly established sole proprietorships. The loans to already existing companies will not exceed 25,000 euro and the interest determined by the cooperative bank union will be 4.2%," said Korkidis.

Nikos Mirtakis, president of the union of cooperative banks, said that Panellini bank would play a managing role. For this purpose, the government should make it a system bank like the National Bank of Greece (NBG), Alpha Bank, Eurobank, Piraeus Bank and help its recapitalization.The idea has been approved both by the government and the head of the task force (the commission to support structural reforms) Horst Reichenbach. Nikos Mirtakis, president of the union of cooperative banks, said that Panellini bank would play a managing role. For this purpose, the government should make it a system bank like the National Bank of Greece (NBG), Alpha Bank, Eurobank, Piraeus Bank and help its recapitalization.

According to recently announced data, the capital requirements of Panellini bank for the next three years vary between 50 and 78 billion euro. So far, Panellini bank meets the requirements of the supervision body (the Bank of Greece) and the index of its capital adequacy ratio is higher than the required minimum, namely 11%.

Mirtakis believes that the shareholders alone can provide from private funds the required amount for the recapitalization over the next three years. However, turning Panellini bank into a system bank suggests that it should be included in the state recapitalization programme and receive money from the Hellenic Financial Stability Fund. If the bank does not receive state aid, it will require a little more time to raise the required amount.

The head of the union of cooperative banks is adamant that the new financial institution will bring many benefits to small businesses. Cooperative banks have technical experience in creating flexible financial products for producers by regions. The more serious role, which the merger of the cooperative banks in a single institution will play, will be that it will give an impetus to the real economy, which currently remains in a financial vacuum.

"The four big banks in Greece have closed to small businesses for almost three years already. It seems that they will be unable to provide funding for small- and medium-sized enterprises by the end of 2013. Small loans to start-up businesses at an interest rate of 4.2% meet the needs of the market today," a representative of the Greek trade union told GRReporter.

Vassilis Korkidis believes that the establishment of a new strong player in the banking market will strengthen the already established financial institutions in the country. "The funding from the cooperative banks will help small businesses pay their debts to the larger financial institutions." According to data of the Bank of Greece for the end of 2012, bad loans reached 23 billion euro 11 billion euro of which were business loans to small and large companies. The infusion of additional funds in the market will support the commercial activity and will give new power to the companies.

The total assets of the cooperative banks reach 3.7 billion euro at present, the deposits in them are about three billion and the loans granted by them slightly exceed 3.2 billion euro. The unification under the supervision of Panellini bank can increase 10-fold the current capacity to fund the market and provide new opportunities for development.