Bank failures have become a significant concern for international bank creditors with interests in Greece. The banking sector is primarily governed by the Bank of Greece (BoG) and the Hellenic Financial Stability Fund (HFSF). The BoG oversees banks’ operations, while the HFSF provides financial support to ensure stability. Bank failures are addressed through laws and regulations, including the Banking Law, Capital Requirements Directive IV (CRD IV), and the Bank Recovery and Resolution Directive (BRRD).

Several Greek banks have faced significant penalties and closures due to wrongdoing. The National Bank of Greece, Eurobank Ergasias, and Piraeus Bank were fined €4.6 million, €3.2 million, and €1.7 million, respectively, in 2018 for violating anti-money laundering regulations. While these banks were not shut down, ATEbank was closed in 2012 due to its inability to meet capital requirements and poor asset quality. The decision to close a bank is usually determined by the severity of the wrongdoing and the potential risk to the financial system.

Bank failure in Greece is defined as the inability of a bank to meet its financial obligations, maintain adequate capital levels, or continue its operations in a safe and sound manner. This can result from poor management, economic downturns, or fraudulent activities. The BoG, as the primary supervisory authority, determines bank failure through regular examinations, stress tests, and monitoring of key financial indicators. The European Central Bank (ECB) also plays a role in assessing significant banks in Greece as part of the Single Supervisory Mechanism (SSM). The BoG has the legal authority to conclude that a bank has failed or is likely to fail based on its assessment of the bank’s financial condition. The BoG can then impose corrective measures, including capital injections, management changes, or restructuring plans.

After a bank failure is concluded, the BoG collaborates with the HFSF and the European Resolution Authority to develop and implement a resolution plan. Common reasons for bank failures in Greece include insufficient capital, poor asset quality, and weak corporate governance.

Bank supervision and resolution planning aim to preserve critical banking functions and ensure continuity during financial distress. The BoG conducts regular inspections, enforces prudential regulations, and monitors banks’ adherence to risk management practices. Resolution planning involves the development of recovery and resolution plans, stress testing, and identifying potential resolution tools.

When a bank within Greece’s jurisdiction fails, the BoG, HFSF, and European Resolution Authority work together to develop a resolution strategy, select the most suitable resolution tools, and execute the plan to restore stability.

In Greece, several options are available for addressing bank failures, including the sale of the business, bridge bank establishment, asset separation, and recapitalization. These tools aim to preserve critical functions, protect depositors, and maintain financial stability. Greek law safeguards account deposits and creditor interests through the Hellenic Deposit and Investment Guarantee Fund (HDIGF), which covers deposits up to €100,000 per depositor per bank. Additionally, the BRRD establishes a hierarchy of creditor claims in the event of bank failure, giving priority to secured claims, followed by unsecured claims, subordinated debt, and equity.

Non-viable firms in Greece are required to exit the market in an orderly manner, following the BoG’s assessment and intervention. This process may involve the sale or merger of the non-viable firm, the transfer of assets and liabilities, or the winding down of the firm’s operations.

Bank liquidation in Greece is governed by the BRRD and the Greek Insolvency Code. When a bank is deemed non-viable and not suitable for resolution, the BoG initiates the liquidation process, which includes the appointment of a liquidator, assessment of claims, and distribution of assets among creditors according to the established hierarchy.

Account holders of a failed bank in Greece can safeguard their positions by keeping track of their deposits and monitoring the bank’s financial condition. In the event of statutory administration, deposit insurance, or bank liquidation, account holders should ensure their deposits are covered by the HDIGF and cooperate with the relevant authorities throughout the process.

In conclusion, the Greek banking sector has experienced a number of bank failures and challenges in recent years. Understanding the legal framework, supervisory practices, and resolution planning can help international bank creditors navigate these complex situations and safeguard their interests. By staying informed and proactive, creditors can better protect their investments and minimize potential losses in the event of bank failures in Greece.