Financial Services Opportunities

An Expert's View about Banking, Finance and Insurance in Greece

Last updated: 20 Sep 2011

Both the Finance Minister and Central Bank Governor have stated since the early stages of the sovereign debt crisis that banking sector consolidation is both desirable and inevitable.

Sector briefing Financial Services Opportunities in Greece Why Greece? Greece is a small market of 11 million people, and following a decade of unprecedented growth, enjoying highest GDP (2009: 20,830 Euro) in SE Europe, the economy slowed down after the 2004 Olympics and GDP plunged into negative figures from 2009 onwards. Greece filed for EU/IMF support in May 2010 and the Troika (IMF/EU/ECB) agreed to provide a ?110 billion loan. In July 2011, a second loan amounting to ?109 billion was agreed by the Euro area member states, to meet Greece?s financing gap up until 2014. Real GDP in Greece shrank 4.5 per cent in 2010; it is forecast to shrink by 3.0 per cent ?The inflation rate is this year and grow by 1.1 per cent in 2012. projected to steadily decline The inflation rate is projected to steadily from 4.7 per cent in 2010, to decline from 4.7 per cent in 2010, to 2.5 per 2.5 per cent this year and to cent this year and to 0.5 per cent in 2012, while the country's current account balance is 0.5 per cent in 2012.? projected to fall from -10.4 per cent of GDP in 2010, to -8.2 per cent in 2011 and -7.1 per cent next year. The unemployment rate is expected to continue rising: from 12.5 per cent in 2010, it had already reached 16 per cent in spring 2011. UK Trade & Investment Sector briefing: Financial Services opportunities in Greece The IMF expects the Greek economy to Opportunities return to growth in 2012-3 Based on current market conditions, it is In its world economic outlook report, the IMF believed that opportunities for UK companies states that macroeconomic and fiscal exist in the following fields: projections for 2011 and the medium-term are consistent with the policies that the IMF has ? Taxation reforms, including agreed to support. Fiscal projections assume a restructuring of the Greek taxation strong front-loaded fiscal adjustment, which system to fight tax evasion already began in 2010 and will be followed by ? Pension System reform further measures in 2011-2013. The ? Privatisation plans Government has agreed to implement a painful ? Debt issuance, debt swap/exchange but long overdue restructuring of the public sector and also privatise public utilities in order to raise an additional 50 bn euro revenue by Find general information on the Greek market 2015. conditions on UKTI?s website. The Doing Business Guide for Greece gives an The Greek Government has found it difficult to overview of Greece?s economy, business drive through the structural reforms forseen in culture, potential opportunities and an the May 2010 MoU, signed with the Troika, in introduction to other relevant issue. the face of strong vested interests. As a result, 2011 begun with increased resistance to measures affecting e.g. protected trades, public transport and the health service. In June/July 2011 the Government agreed with the Troika to further expedite these reforms and receive, in return, further financing and private sector involvement through a Greek debt swap/exchange. The details of this second bailout package are expected to have been completed by early October. Shipping is the healthiest and most dynamic sector of the Greek economy, representing almost 8% of GDP. Greek ship-owners control the world?s largest merchant fleet, involved internationally in the cargo and passenger trades. There are traditionally strong links between the Greece based shipping Community and the City of London, but one should not underestimate growing competition from the emerging shipping centres in the Far East. Greek companies have invested heavily in the wider region and as a result of this expansion, 4.000 Greek firms are active in SE Europe, with capital of almost ?4 billion. Many Greek Banks are present in the neighbouring countries, either through their own network or by taking over local banks. Most of these companies have turned towards their overseas network as an alternative to the significant drop in domestic consumption patterns. UK Trade & Investment Sector briefing: Financial Services opportunities in Greece Sectors of interest Register enjoying a leading position in the market. Lloyd?s Register classes 28% of the 1. Greek-controlled fleet, comprising some 880 Shipping ships (totalling 25 million gt) and is the market Greek controlled tonnage remained in first leader for Greek-flagged vessels with a market place globally despite the current economic share of 33%. Direct competitors are the downturn. It is worthwhile noting that Greek American and Norwegian classification societies owners control 24% of the world tanker fleet (ABS and DNV). Apart from their well (chemical, crude oil and product carriers) and established presence in the market as Ships 23% of the world bulk carrier fleet in terms of RSO (Recognised Security Organisation), dwt (excluding ships currently on order). Greek Lloyd?s has been appointed as Advisor to the ship-owners are also emerging in the Ministry of Merchant Marine as RSO for transportation of liquefied natural gas (LNG) carrying out risk assessment in Greek ports. through both ownership and management. The Other UK companies participating in joint vast majority of Greek ships is engaged in ventures with Greek firms which were cross-trade activities between third countries approved as RSOs for ports are MUSC and and thus affected by global economy and Control Risks. international shipping conditions. The biggest single seller of underwriting Moreover, Greek-owned vessels flying EU insurance services to Greek shipping member states flags amount to 48.2% of EU interests remains Lloyds London mainly in the shipping (dwt). Greek shipping companies have hull & machinery sector. been listing their shares on international stock UK P & I clubs are market leaders in Greek markets (NYSE, NASDAQ and London), in a shipping as owners rely heavily on their clubs sign of their growing role in the global for legal and professional support and advice. economy. The number of companies is also London P & I (A. Bilbrough & Co): Their Greek estimated to decrease, as current trends in membership has increased substantially in shipping dictate concentration, leading to recent years and now represents almost half mergers among smaller companies. the club?s directly entered tonnage (43%). Other clubs with offices in Piraeus are West of Financial Services London enjoy a predominant England and UK. Direct competitors are the position in all shipping related Services such as two Norwegian clubs Skuld and Gard. marine insurance, chartering, ship classification, chartering, shipping finance, Marine insurance pulled in $4.7bn in legal services, accounting and dispute premiums for the London market last year resolution. besides $1.6bn in gross P&I club premiums and ship broking, which produced net exports of Greece is the 4th largest market for London more than $700m. legal services in the world almost exclusively from shipping. Eight major British law firms Insurance brokers Lambert Fenchurch, operate offices in Piraeus, whose combined Marsh (through Greek agent), Willis (through turnover is in the order of over £20 million. Greek agent) are key players and enjoy Namely, these are Hill Taylor Dickinson, Norton substantial market shares in marine insurance. Rose, Hollman Fenwick & Willan, Watson Farley, Ince & Co, Stephenson Harwood, Clyde, 2. Banking and Richards Butler. Their London offices Mergers & banking consolidation dealing with Greek ship owners derive between Both the Finance Minister and Central Bank 2 and 3 times that amount in turnover which Governor have stated since the early stages of stems from Greece, so the overall amount the sovereign debt crisis that banking sector spent either by Greek ship owners or consolidation is both desirable and inevitable. on their behalf by their P&I clubs and insurers The Government?s rationale is that on English solicitors is estimated at consolidation can improve efficiency, boost approximately US$100 million per year. investor confidence, as well as capital available for lending to stimulate the economy. There is It is also worth noting that 88% of the Greek- concern that some Greek banks are vulnerable owned vessels are monitored by classification and that their best prospects may be to start a societies belonging to IACS, with Lloyd?s UK Trade & Investment Sector briefing: Financial Services opportunities in Greece process of merger, following the EU stress Greece and has resulted in creating two tests. On the other hand, international banks, different layers of more and less protected whether already present in the market or not, sectors in the labour force. The Troika has may take a second look at the opportunities. urged the Greek Government to implement major reforms in the pension system; these Greece has 19 local and 21 international banks. are gradually taking place. Greek commercial banks control 81.2% of total banking sector?s assets, international banks Social Security contribution evasion is a huge 10.1% and two special credit institutions a problem in Greece. The rules that govern the further 8.3%. The presence of cooperative and Greek welfare state have not changed regional banks is limited and the Greek significantly since Greece?s accession to the banking system is one of the most European Community in 1981, and this is concentrated in the Eurozone. The five larger reflected in the inherent fragmentation and banks have expanded in the Balkans and also inequality that still burdens its pension system. have a presence in the Ukraine and Turkey. Reform has been consistently constrained, reflecting the institutional rigidity of the Greek 3. welfare state. Insurance The Greek insurance market has changed The public pension system in Greece is still significantly over the last few years. From a highly segmented and complex. Consisting of peak of 183 companies in 1993 the market had 24 primary pension funds and more than 120 shrunk to 109 by mid-1999. The market may supplementary funds, all with different shrink further to around 50 companies with regulations for pension rights, these funds virtually all the small and undercapitalised have now been merged into 5 main pension companies either shut down or absorbed. funds, and 8 supplementary pension funds. There is already substantial concentration, with the top five companies in the life market In spite of the relatively high contribution controlling two thirds of the business and the rates, contributions to funds from employers top five general companies accounting for just unde and employees are insufficient to cover the r half. The insurance industry faces current level of pensions. The State in effect increased operating costs which together with finances the deficits through the state budget. increased competition are applying pressure on m The EU has urged the Greek Government to argins. Amongst the greatest challenges increase age limits and rationalise the pension facing the companies are: system. The Greek pension funds will also have to make a much more effective use of their ? Protecting and extending customer assets which will create opportunities for UK relationships companies. ? Managing the risks of new products and services (especially in the 5. The Legal System Balkans) The Greek legal system is a member of the The numbers of multi-national insurers who are family of European laws and is especially present in Greece, both in the non-life and the influenced by German and French law. Unlike life segments, is small relative to the need for Anglo-American common law, Greek law is Greek citizens to meet the costs for their own codified. The distinction between public and healthcare expenses and retirement plans. private law is a fundamental feature of the The long-term prospects for the life segment Greek legal system. In order to become an are good, while there are some signs that non- attorney-at-law in Greece, it is necessary to life insurance is also underdeveloped. train under the supervision of an attorney-at- law for 18 months following graduation from a 4. Pension funds reform law school. There are 63 bar associations in The Greek welfare state has been described by Greece. Only in criminal cases is a lawyer many researchers as anachronistic in terms of allowed to represent clients in courts outside of social protection within the European Union, his or her district, though this is about to and has developed into a fragmented and change as a result of the current opening of inherently unequal system of welfare provision. the legal profession. As a practical matter, This is also reflected in pension provision in special appearances are allowed. The size of UK Trade & Investment Sector briefing: Financial Services opportunities in Greece law offices in Greece is small. A law partnership Privatisation opportunities typically has a handful of senior partners, who The Government has drawn up a privatisation are also the founding partners and a few plan (including gas, airports, roads, lotteries, associates and trainees. Notaries Public also real estate etc). Some strategic shares will be play a very important role in the Greek legal retained by the Government. system. The responsibilities of the notary The Troika agreed with the Goverment to form public complement those of the attorneys. an independent Fund that will coordinate & First, a notary public drafts legal instruments implement privatisations: the Inter-ministerial such as contracts and wills. Second, a notary Committee for Asset Restructuring and authenticates instruments. Third, a notary Privatisations (ICARP). Expressions of interest retains the original of every instrument he or for advisors are currently issued and UK firms she drafts, thereby functioning as a public who are interested in such projects should record office. Judges and public prosecutors, either visit the Ministry of Finance website who also have similar legal training, enter the (http://www.minfin.gr/portal/en) or contact Civil Service upon passing a special the UKTI team in Athens for further examination following law school. A number of information. UK law firms have offices in Athens and Piraeus to primarily service their shipping customers Inter-ministerial Committee for Asset (see shipping section). We expect the law Restructuring and Privatisations (ICARP): profession to become accessible to EU national Mr Costas Mitropoulos, CEO following the liberalisation of protected (closed Mr Andreas Taprantzis, Deputy CEO professions. T. + 30 210 3721990 UK Trade & Investment Sector briefing: Financial Services opportunities in Greece The following table depicts the major privatisation that the Greek Government intends to carry out in for 2011-15: Greek Privatisation Plan Date Name % to Type of Sale be sold 2011 Q2 OTE 10% share sale Q3 Thessaloniki Water 40% share sale of SPV (EYATH) Q3 Athens Intl Airport (AIA) 100% Concession Q3 OPAP 100% Concession Q3 Thessaloniki Port 23.3% share sale of SPV Q3 State Lotteries 100% share sale of SPV Q4 Piraeus Port 23.1% share sale of SPV Q4 Hellenic Defence 99.8% share/asset sale Systems (EAS) Q4 Hellenic Post Bank 34% share sale Q4 Public Gas Company 55% share sale (DEPA) Q4 Public Gas Company 31% share sale (DESFA) Q4 Railway Operator 100% share sale (Trainose) Q4 Larco 55.2% share sale Q4 Alphabank 0.6% share sale Q4 National Bank of Greece 1.2% share sale (NBG) Q4 Hellenic Horse Racing 100% share sale (ODIE) Q4 Mobile Telephony 100% sale of rights Q4 Casino Mont Parnes 49% share sale Q4 Hellenic Vehicle Industry 72.6% share sale (ELBO) Q4 OPAP 34% share sale Q4 Hellenikon 1 _ _ share sale of SPV* Q4 Four Airbus Aircraft 100% sale Q4 Real Estate Assets 1 _ _ share sale of SPV (incl. office space) UK Trade & Investment Sector briefing: Financial Services opportunities in Greece Date Name % to Type of Sale be sold 2012 Q1 Athens Intl Airport (AIA) 21% share sale of SPV Q1 Hellenic Petroleum (ELP) 35.5% share sale Q1 Piraeus Bank 1.3% share sale Q1 Hellenic Agricultural 38.6% share sale Bank (ATE) Q1 Egnatia Odos Rd 100% share sale of SPV Q1 Hellenic Post (ELTA) 40% share sale Q1 Ports 100% share sale of SPV Q2 Athens Water (EYDAP) 27.3% share sale of SPV Q2 Loan and Consignment 100% share sale of SPV Fund Q2 Real Estate Assets 2 _ _ share sale of SPV Q3 Public Power Corporation 17% share/asset sale Q3 Hellenic Motorways 1 100% share sale of SPV Q3 Regional Airports 1 100% share sale of SPV Q4 Hellenikon 2 _ _ share sale of SPV Q4 Real Estate Assets 3 _ _ share sale of SPV Q4 Digital dividend 1 100% sale of rights Q4 Thessaloniki Water tbd share sale of SPV (EYATH) Q4 Hellenic Goldmines 1 100% share sale of SPV 2013 Q1 Offshore Gas Storage 100% share sale of SPV Q2 Regional Airports 2 100% share sale of SPV Q2 Ports 2 100% share sale of SPV Q3 Real Estate Assets 4 _ _ share sale of SPV Q3 Hellenic Goldmines 2 100% share sale of SPV Q4 Digital dividend 2 100% sale of rights Q4 Athens Water (EYDAP) tbd share sale of SPV Q4 Hellenic Motorways 2 100% share sale of SPV 2014 Real Estate/Land _ _ share sale of SPV Hellenic Motorways 3 100% share sale of SPV 2015 Real Estate/Land _ _ share sale of SPV Hellenic Motorways 4 100% share sale of SPV * On the basis of ATE share capital after the ongoing capital increase. UK Trade & Investment Sector briefing: Financial Services opportunities in Greece Major events and activities UKTI contacts Shipping Conference 2011 Sotiris Leontaris Contact: Marina Arvanitakis Trade & Investment Manager Email: marina.arvanitakis@ukti.gsi.gov.uk British Embassy Greece Time: November 2011 Tel: (0030) 210 7272645 Email: sotiris.leontaris@fco.gov.uk Privatisation roundtables in London www.ukti.gov.uk Contact: Sotiris Leontaris Email: sotiris.leontaris@fco.gov.uk Time: Oct/Nov 2011 Find full details of all events in this country and sector on the UKTI website. New export events are added daily to the site and you can register to be alerted to them on a daily, weekly or monthly basis UKTI?s Tradeshow Access Programme (TAP) provides grant support for eligible Small & Medium Sized Enterprises (SME's) to attend trade shows overseas. Find out more about UKTI support for attendance at overseas events. UK Trade & Investment Sector briefing: Financial Services opportunities in Greece ? Establishment of interest of such Next steps - contacts in working with you How UKTI can help ? Arranging appointments ? Organise seminars or other events for British companies wishing to develop their you to meet contacts and promote your business in the Greek market are advised to company in the Greek market undertake as much market research and This work is available via our Overseas Market planning as possible in the UK. UKTI?s team in Introduction Service (OMIS) a chargeable Greece with its wide local knowledge and service which assists British-based companies experience, can provide a range of services to wishing to enter or expand their business in British-based companies wishing to grow their overseas markets. business in global markets. To find out more about commissioning this This can include: work, or accessing other UKTI services and ? Provision of market information specialist advice, please visit the UKTI website ? Validated lists of agents/distributors to find contact details for your local UKTI ? Key market players or potential office. customers in the Greek market Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Innovation & Skills, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published 2011 by UK Trade & Investment. Crown Copyright © Published 2011 by UK Trade & Investment. ©Crown Copyright 2011 You may reuse this information (not including logos, images and case studies) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government-licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gsi.gov.uk This publication is also available from our website at www.ukti.gov.uk or for more information please telephone +44 (0)20 7215 8000. UK Trade & Investment Sector briefing: Financial Services opportunities in Greece
Posted: 16 September 2011, last updated 20 September 2011

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