o_19heefouak9i9v4do11ac41pi7a.pdf

KONSTANTINOS I. LOIZOS
Figure 8: Average cost of debt
Source: Author’s calculations
Average cost of debt rises over time for all three banks although to different
degrees. ETEBA’s cost of debt rises from a low of 3% (0.03) to 4% (0.04) in
1965-66 to 25% (0.25) in 1993. Investment Bank’s ratio falls initially to 1%
(0.01) until 1966 and then rises persistently to reach the level of 26% (0.26) in
1990, leaving aside the extreme values of 48% (0.48) and 41% (0.41) for the two
last years for which we have data. On the other hand, for ETBA the cost of debt
rises from 4% (0.04) in 1967-71 to 14% (0.14) in 1990 to reach the level of 16%
(0.16) to 18% (0.18) in the period 1991-93.
Indeed, as Table 8 indicates, average cost of debt rises, on average, for all three
banks. However, ETBA maintains a relatively low average cost of 14% during 1987-
93, while for the other two banks the cost is much higher especially for Investment
Bank. Indeed, deregulation made the cost of external financing for development
banks almost prohibitive with respect to previous periods. This effect is reflected in
the rise of this cost by an average of 100% for ETEBA but by 125% for Investment
Bank and by 56%, on average, for the state-owned ETBA. If a rising cost of debt indicates
a deterioration of the borrowing conditions for each bank, then we would expect
that at least Investment Bank and ETEBA, the private banks, faced difficulties in
meeting their debt obligations, especially in the last period of their operation. The case
was different for ETBA which had the support of the government at the time when
borrowing conditions for the private banks were deteriorating.
~ 244 ~