o_19heefouak9i9v4do11ac41pi7a.pdf

KONSTANTINOS I. LOIZOS
debt/equity ratios fell during deregulation only for ETEBA, rising for Investment
Bank and ETBA.
Net profits growth should reflect GDP growth as an indicator of economic development.
This is indeed the case for Investment Bank, with falling net profits
growth, although the pattern for ETBA is unclear. However, ETEBA saw a rise in
its net profits growth during the deregulation period, indicating its positive reaction
to financial deregulation and its successful transformation. On the other hand, the
picture we obtain for loans and security holdings growth with respect to GDP
growth indicates the continuing endeavour of banks to contribute to economic and
financial development even if they were experiencing financial losses. Hence despite
its losses, ETBA’s loans growth rate, although falling during the crisis years as a result
of diminishing GDP, rose in the deregulation era in an effort to reassume its
developmental role. The same is true of security holdings after the mid-1980s as the
banks attempted to respond to the new financial environment and, except for Investment
Bank, maintained positive growth rates on average. However, the negative
median values for both Investment Bank and ETBA indicate their less successful
role in exploiting the opportunities of financial development.
The examination of the data indicates various differences between the three
banks. ETEBA seems to have been the more successful on financial measures, while
Investment Bank suffered great losses and entered a period of reorganization during
the 1990s. On the other hand, ETBA, as a state-owned bank, followed a completely
different path in many respects compared to the other two private banks
and seems to have disregarded private profitability criteria in favour of developmental
goals posed by the government. However, all of them faced the same dilemmas
during the mid-1980s and took the same decisions to transform during the
1990s when the support of the state was gradually decreasing. This was the moment
of truth for them when the changes for which they had prepared their customers
were now being imposed on thems. It is in this way that they come to reflect
financial development in Greece.
A consistent interpretation of these findings is not possible without taking into account
the general political and institutional environment of their operation. Although
the three development banks were agents of economic and institutional change in the
Greek economy, the dependence of ETEBA and Investment Bank and especially of
the state-owned ETBA on government decisions was decisive as regards their ability
to make a great difference. If financial development did not progress at the same pace
as economic development, this was not the banks’ fault but reflected the ability of the
state to promote both targets of development effectively. Furthermore, in certain periods,
such as the dictatorship era of 1967-73 institutional change came to a halt or
was based on distorted incentives for particular social groups, and this was reflected
also in the performance of the banks, especially after the two oil crises when these
distortions became apparent. But even during the post-dictatorship period, the ‘fiscal
regime’ was not supportive of the role the Banks were meant to play in institutional
transformation. When the international financial system moved on to liberalization the
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