Financing Rules

This section presents issues relating to rules that govern the financing of natural and legal persons, such as:

1) abolition of restrictions applicable to consumer credit and loans to natural persons;

2) abolition of minimum lending rates and the maximum rate at which credit institutions discount Greek government paper; and

3) credit extended by credit institutions and Athens Exchange members to their customers for the financing of stock market transactions.

The institutional framework of this section comprises the following Bank of Greece Governor's Acts:
1955/2.7.1991
2326/4.8.1994
2474/31.5.2001
2567/23.11.2005
2523/2003
2580/2006
2599/2007

Bank of Greece Governor's Act 1955/2 July 1991: "Rules governing the extension of drachma-denominated loans by credit institutions operating in Greece"

Bank of Greece Governor's Act 2523/12 June 2003 "Amendment to Bank of Greece Governor's Act 1955/2 July 1991, as currently in force, on consumer credit and personal loans to natural persons"

Bank of Greece Governor's Act 2523/12 June 2003 amended the provisions of Bank of Greece Governor's Act 1955/2 July 1991 and abolished restrictions applicable to consumer credit and loans to natural persons. Specifically, it abolished the overall cap of €25,000 per person and bank, as well as the caps on various types of credit extended to natural persons.

Consumer credit and personal loans are now extended on the basis of purely banking criteria, which have to be strictly applied. The terms of the relevant financing are determined by, inter alia, the degree of utilisation of qualitative and quantitative information provided by the Greek credit bureau and by the strict application of the criteria of consumer risk management systems.

At the same time, credit institutions' customers must make full use of the information provided pursuant to the applicable provisions, in order to compare financing products and properly estimate the level of liabilities and any risks involved.

Bank of Greece Governor's Act 2326/4 August 1994: "Abolition of (a) minimum lending interest rates and (b) the maximum interest rate at which credit institutions discount Greek government paper"

Bank of Greece Governor's Act 2326/4 August 1994 abolished (a) the minimum bank lending rates referred to in Bank of Greece Governor's Act 2091/1 June 1992; and (b) the maximum interest rate at which credit institutions discount Greek treasury bills. It also repealed para. 2 of Bank of Greece Governor's Act 514/17 June 1985 and any other provision setting interest rates at which credit institutions discount Greek government paper.

Bank of Greece Governor's Acts 2474/31 May 2001, 2567/23 November 2005, 2580/15 June 2006 and 2599/2 November 2007: "Credit extended by credit institutions and Athens Exchange members to their customers to finance stock market transactions"

Bank of Greece Governor's Acts 2474/31 May 2001, 2567/23 November 2005, 2580/15 June 2006 and 2599/2 November 2007 addressed matters relating to credit extended by credit institutions and Athens Exchange (Athex) members to their customers to finance stock market transactions. Specifically:

It abolished the cap per customer on credit extended by Athex members and non-Athex member credit institutions to their customers for financing transactions on the Athex.

The minimum (maintenance) margin requirement to be complied with throughout the maturity of the credit and the initial margin requirement are set at 30% and 40% of the market value of the securities collateral deposited in the margin account, respectively. In the event that the margin posted in the margin account is below the initial and above the maintenance margin requirement, new transactions must not lead to increases in the absolute level of margin shortfall. Margin is defined as the difference between the market value of the securities collateral and amount of the loan advanced against it.

Collateral can also be in the form of cash, which is deposited in a special account kept with a credit institution.

By way of analogy to the provisions applicable to Athex members, the Act: (i) specifies the valuation method of collateral; (ii) introduces provisions to enhance the transparency of margin trading; and (iii) lays down the information to be provided to natural persons about the risks involved.

Credit may also be extended to natural and legal persons included in the ten largest share- or stock-holders of a firm to finance the acquisition of shares or stock, respectively, provided that, by purchasing them, borrowers maintain or increase their holdings in the firm's capital.

Finally, it should be noted that the limits set by Bank of Greece Governor's Act 2474/31 May 2001 do not relieve credit institutions of their responsibility to carry out effective risk management, ensure their timely adaptation to current conditions and reinforce internal control procedures across their network.