o_19heefouak9i9v4do11ac41pi7a.pdf

KONSTANTINOS I. LOIZOS
(Psilos, 1964:228-30; Psilos and Westebbe, (1964) 2 . Finally, the contribution of ED-
FO to capital market development should be assessed negatively to the extent that it
offered low-cost lending to firms that would otherwise have sought funding
through issuing of securities (Psilos, 1964:230). In 1960 another semi-public institution
called Industrial Development Corporation (IDC) (1960-64) was established
with the participation of the Greek government, the National Bank of Greece, the
Consignation and Loan Fund, the Commercial Bank group and other small private
investors. The aims of IDC included the establishment of private or public mining
or industrial companies, involvement with existing companies in order to assist
them with modernization, the provision of technical and financial assistance to
companies that contribute to industrial development, and the training of technical
personnel in order to promote the above objectives. However, IDC’s operation was
considered unsatisfactory as it invested in only 13 small enterprises with a minor
contribution to promoting economic development (Psilos, 1964:231-2). Halikias
(1978:246) attributes the failure of IDC to become actively involved in the risks of
industrial investment to the fact that its board of directors consisted mainly of businessmen
that did not believe in direct government involvement in industrial investment.
Hence, IDC confined itself to the issuing of feasibility studies and the dissemination
of information to domestic and foreign entrepreneurs about the conditions
for investment in Greece.
The history of Greek development banking started principally in the early 1960s.
However, even from the beginning it was marked by confrontation between the
Bank of Greece (as a government agency) and the commercial banking duopoly.
The launch by both the National Bank of Greece and the Commercial Bank of
Greece of their own development banks was met with disapproval by the Bank of
Greece, which favoured securing their cooperation in the establishment of a powerful
joint institution (Kostis, 1997:n. 152, 193). However, the commercial banks’ reaction
to the establishment of ETBA, the development bank that was under the direct
control of the government, was to claim the control of long-term financing for themselves
(Kostis, 1997:99). Nevertheless, according to Xanthakis (1995:177-8) the three
Greek development banks, ETBA, ETEBA and Investment Bank, that were established
during the period 1962-64 had as major objectives the facilitation of industrial
development, the appraisal and support of investment, and the development of
the capital market.
Development banks obtained funds mainly through the Bank of Greece, their parent
commercial banks, the Postal Savings Office and some external sources, especially the
World Bank and the European Investment Bank. In addition, foreign investors participated
in the share capital of ETEBA and Investment Bank for a significant period of
their operation. After 1975, when the law allowed development banks to issue their
2 Halikias (1978:245) also has a different view on the relation between EDFO and the
commercial banks, indicating that EDFO competed with commercial banks for customers instead
of acting supplementarily to them in financing activities that carried risks that these
banks could not assume.
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