Greek banks looking beyond traditional lending for new sources of revenue will face closer regulatory scrutiny under new rules requiring them to demonstrate that expansion plans won’t weaken their capital, liquidity or risk controls.
The Bank of Greece, the country’s central bank and banking supervisor, has introduced a more detailed approval framework for lenders seeking to enter new financial or ancillary businesses.
Under the rules, banks will have to secure regulatory clearance before launching a new activity and provide detailed information on both the business itself and its potential effect on their financial position.
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That includes three-year projections for key capital and liquidity ratios incorporating the impact of the proposed operation. The requirement effectively asks banks to demonstrate in advance that diversification won’t undermine their ability to meet prudential requirements.
The review will extend well beyond balance-sheet metrics. Banks must explain how the new operation will be organized, which information-technology systems will support it and whether activities will be outsourced to third parties. They will also have to detail changes to their risk-management framework, including controls designed to combat money laundering and terrorist financing.
The central bank will even reassess whether a lender’s board collectively has the skills and experience needed to oversee the expanded business.
Approval isn’t automatic. The Bank of Greece can request additional information and reject an application if it concludes that risks haven’t been adequately addressed or that the new operation could compromise the bank’s ability to meet regulatory obligations.
There are, however, limits on how long the process can take. The supervisor generally must reach a decision within six months after receiving an application. If the submission is incomplete, the clock begins once all necessary information has been provided.
