School of Social Sciences

Master in Business Administration (MBA)

Postgraduate Dissertation

The future of the banking sector in . Options of a different type of bank.

Student: Argyro-Ioanna Papadopoulou

Supervisor: Aristidis Bitzenis

Thessaloniki, Greece, April 2018

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The future of the banking sector in Greece. Options of a different type of bank.

Student: Argyro-Ioanna Papadopoulou

Supervising Committee

Supervisor: Co-Supervisor: Aristidis Bitzenis Varvara Myloni University of Macedonia University of

Thessaloniki, Greece, April 2018 Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

Acknowledgments

I am extremely thankful to my supervisor Professor, Mr Aristidis Bitzenis, who helped me with his accurate remarks and his valuable instructions, to finish this Dissertation.

I am grateful to my daughter and my husband for their patience and support during my Postgraduate Studies.

Postgraduate Dissertation iv Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

Abstract

The recent economic crisis, apart from the negative effects it has brought in almost all sectors of the Greek economy, has influenced in a strong way the banking sector as well. While a decade ago we were talking about an emerging Greek banking sector that had surpassed the national borders and had expanded into the and Eastern Europe, today it has shrunk a lot and it will take a lot of effort to overcome the crisis. Initially, the economic crisis and then the imposition of capital controls led many people to lose the key element that banks should characterize: faith. A lot of people do not trust the banking system (at least as they used to, in the past) and prefer to transfer their deposits to overseas banks or keep their money in their houses.

For this reason, banks should change their image, through their corporate social responsibility, in order to regain the trust of people. They should have a more human perspective (eg Umpqua Bank), follow the rules of Ethical Banks (eg Grameen Bank, Banca Popolare Etica, etc.), but also combine new technologies in banking (e-banking). Strategic bank management should have, first of all, a human orientation, which should harmonize it with the technological orientation. The case study of this dissertation will concern the Cooperative Bank of Karditsa, as the only member from Greece, in the European Federation of Ethical and Alternative Banks, which achieved a course of development, even in time of economic crisis.

Keywords

Crisis, Greek banking sector, ethical banks

Postgraduate Dissertation v Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

Περίληψη

Η τελευταία οικονομική κρίση, εκτός από τα αρνητικά αποτελέσματα που επέφερε σχεδόν σε όλους τους τομείς της ελληνικής οικονομίας, είχε πολύ μεγάλο αντίκτυπο και στον τραπεζικό κλάδο. Ενώ, πριν από μία δεκαετία μιλούσαμε για έναν αναπτυσσόμενο ελληνικό τραπεζικό τομέα, ο οποίος είχε ξεφύγει από τα εγχώρια σύνορα και είχε επεκταθεί στα Βαλκάνια και στην Ανατολική Ευρώπη, σήμερα έχει συρρικνωθεί πολύ και θα χρειαστεί αρκετή προσπάθεια για να ορθοποδήσει και πάλι. Αρχικά η οικονομική κρίση και εν συνεχεία η επιβολή των capital controls, έκαναν πολύ κόσμο να απολέσει το βασικότερο στοιχείο που θα πρέπει να χαρακτηρίζει τις τράπεζες: την πίστη. Πολλοί είναι αυτοί που δεν τις εμπιστεύονται πια (τουλάχιστον στο βαθμό που της εμπιστεύονταν παλαιότερα) και προτιμούν να μεταφέρουν τις καταθέσεις τους σε τράπεζες του εξωτερικού, ή να κρατούν τα χρήματά τους στα σπίτια τους.

Γι’ αυτό, λοιπόν, θα πρέπει οι τράπεζες, μέσω της εταιρικής κοινωνικής τους ευθύνης, να αλλάξουν πρόσωπο, προκειμένου να ξανακερδίσουν την εμπιστοσύνη του κόσμου. Θα πρέπει να έχουν ένα πιο ανθρώπινο πρόσωπο (π.χ. Umpqua Bank), να ακολουθούν τους κανόνες των Ηθικών Τραπεζών (π.χ. Grameen Bank, Banca Popolare Etica κ.ά.), αλλά ταυτόχρονα να συνδυάζουν και τις νέες τεχνολογίες στην τραπεζική (e-banking). Το στρατηγικό μάνατζμεντ των τραπεζών θα πρέπει να έχει, κατά πρώτον, ανθρώπινο προσανατολισμό, τον οποίο θα πρέπει να τον συνδυάζει αρμονικά με τον τεχνολογικό προσανατολισμό. Το case study της παρούσας εργασίας θα αφορά τη Συνεταιριστική Τράπεζα Καρδίτσας, ως το μοναδικό μέλος από την Ελλάδα, στην Ευρωπαϊκή Ομοσπονδία Ηθικών και Εναλλακτικών Τραπεζών, η οποία κατάφερε να έχει επιτυχή πορεία, ακόμη και στην περίοδο της οικονομικής κρίσης.

Λέξεις – Κλειδιά

Κρίση, ελληνικός τραπεζικός τομέας, ηθικές τράπεζες

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Table of Contents

Abstract ...... v Περίληψη...... vi Table of Contents ...... vii List of Figures ...... ix List of Tables ...... x List of Abbreviations & Acronyms ...... xi 1. Introduction ...... 1 1.1 Purpose of the study ...... 1 1.2 Context of the study ...... 1 1.3 Significance of the study ...... 2 1.4 Research objectives ...... 2 1.5 Aim and research question ...... 3 1.6 Definition of terms ...... 3 1.7 Dissertation outline ...... 3 2. Literature review of economic crises and social and ethical responsibility of banks ...... 5 3. Research methodology ...... 15 4. The main economic crises (financial crises, oil crises, sovereign dept crises) that marked the last century, both the whole world and Greece ...... 22 4.1 Previous economic crises: the Great Crash of 1929 in the USA (due to the collapse of the New York Stock Exchange) and the oil crises of 1973 and 1979 (due to the oil embargo from the OPEC countries) ...... 22 4.1.1 Τhe Great Crash of 1929 ...... 22 4.1.2 Τhe oil crises of 1973 and 1979 ...... 24 4.2 The recent economic crisis ...... 26 4.3 The imposition of capital controls ...... 34 5. The banking sector ...... 38 5.1 The international banking sector ...... 38 5.2 The banking sector in Greece ...... 41 5.3 The current situation in the Greek banking sector ...... 49 6. Social and ethical responsibility of banks ...... 56 6.1 Strategic banking management ...... 56

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6.2 Corporate Social Responsibility in the banking sector ...... 59 6.3 New technologies in banking (e-banking) ...... 65 6.4 Human and Ethical Banks ...... 69 7. Case Study (Cooperative Bank of Karditsa) ...... 74 7.1 Objectives of the Case Study ...... 74 7.2 Description and history of the Cooperative Bank of Karditsa ...... 74 7.3 Products and services ...... 77 7.4 Data on the cooperative banking sector ...... 83 7.5 Competitive environment ...... 88 7.6 Organization and Management ...... 90 7.7 Strategy of the Bank ...... 92 7.8 Analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT) ...... 96 7.9 Basic conclusions of the Case Study ...... 97 7.10 Questions for discussion ...... 98 8. Conclusions ...... 99 Bibliography ...... 105

Postgraduate Dissertation viii Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

List of Figures

Figure 1 After the fall. The lingering bustle on Wall Street in November 1929 ...... 23 Figure 2 Oil price graph 1861-2007 ...... 24 Figure 3 Sovereign debt as percent of GDP ...... 30 Figure 4 Queues at ATM, with the announcement of the referendum ...... 34 Figure 5 Cross-Border and Local Claims by Foreign Banks, 2005-2015 ...... 40 Figure 6 Yoga classes in Umpqua Bank ...... 57 Figure 7 Evaluation of CSR significance by companies ...... 61 Figure 8 Degree of application of CSR actions in Greece ...... 61 Figure 9 Muhammad Yunus and Grameen Bank: Nobel Peace Prize, 2006 ...... 70 Figure 10 Number of members 2010-2016 ...... 75 Figure 11 Total deposits 2011-2016 ...... 78 Figure 12 Total loans 2011-2016 ...... 79 Figure 13 Bank branches in the Prefecture of Karditsa ...... 89 Figure 14 Organization chart of the Cooperative Bank of Karditsa ...... 91

Postgraduate Dissertation ix Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

List of Tables

Table 1 Greek banking sector 1956-1966 ...... 46 Table 2 Expansion of presence of Greek Banks in South Eastern Europe ...... 50 Table 3 CR index 2016-2017 ...... 60 Table 4 Numbers of FEBEA ...... 72 Table 5 Financial data of Cooperative Banks ...... 85 Table 6 Changes in deposits and loans between 2010 and 2016 ...... 86 Table 7 Capital adequacy ratio 2016 ...... 87 Table 8 SWOT analysis of the Cooperative Bank of Karditsa ...... 96

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List of Abbreviations & Acronyms

USA United States of America OPEC Organization of the Petroleum Exporting Countries G-7 Group of Seven UK United Kingdom IMF International Monetary Fund G-20 Group of Twenty ECB European Central Bank EMU Economic and Monetary Union GDP Gross Domestic Product ATM Automated Teller Machine FSB Financial Stability Board PSI Private Sector Involvement CSR Corporate Social Responsibility EFT/POS Electronic Funds Transfer at Point Of Sale PIN Personal Identification Number FEBEA Federation Europeenne des Banques Ethiques et Alternatives GABV Global Alliance for Banking on Values EIF European Investment Fund ETEAN Hellenic Fund for Entrepreneurship and Development SMS Short Message Service ACBG Association of Cooperative Banks of Greece IT Information Technology ELA Emergency Liquidity Assistance MFC Micro-Finance Centre SES Net Social Entrepreneurship Supporting Net EaSI Employment and Social Innovation WEGO Women Economic-independence and Growth Opportunity SWOT Strengths, Weaknesses, Opportunities, Threats

Postgraduate Dissertation xi Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

1. Introduction

1.1 Purpose of the study

The purpose of this dissertation is twofold. In the first place, it aims to show the responsibility of the banking sector and the governments of the Euro-area for the emergence and spread of the economic crises, as well as for the social problems that have emerged (such as unemployment, austerity, etc.). This responsibility results from the fact that for many decades banks had expanded into the creation of products and services that contained excessive risks, instead of dealing with their core activities, which are the receiving deposits and granting of loans. Also, the governments of the Euro-area, as well as European Central Bank are responsible, because with the austerity policy, have created a recession that, for almost a decade, has plagued Europe and especially Greece. Greek banks were recapitalized, but most people have been victims of this crisis, as a result they do not trust banks. Thus, with these data, the second purpose of the dissertation is to show whether a different banking sector, with an ethical and social orientation, can help solve the problem. We are referring about the ethical banking sector that is close to human beings, provides support for all and aims at social, environmental and cultural development.

1.2 Context of the study

The general context of this dissertation will focus on the results of the crisis, in recent years, in the banks of our country. While up until the previous decade there has been a banking sector that operated at normal rates, in recent years, it has shrunk much and essentially consists of only four banks. The emergence of the crisis in Greece in the form of a sovereign debt crisis and the subsequent “haircut” that was held with the involvement of the private sector (PSI) resulted in some banks being closed and put under special liquidation, while those of the banks have remained, operate since 2015 under the capital controls regime. Many economists accuse the European Union because, with its policy, instead of resolving the problem of the crisis, it prolongs it for many years. Under these

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circumstances, the existence of a different banking sector, with a social and ethical orientation, should not seem strange to us.

1.3 Significance of the study In our days, the economic crisis has a clear social impact and the question of whether the banking sector in its well-known form may be part of the solution, remains so far. The significance of such research is even more valuable, as it seems that a different banking sector is emerging, which has as main feature the ethical funding. Although ethical banking is a complementary banking system, its economic stability and returns in the recent crisis must not go unnoticed. The development of ethical funding and micro-loans without social exclusions is a very significant fact, especially in our time, because the trust of people towards the conventional banking system has been shaken. Through this dissertation, it is emphasized the significance of ethics in the banking sector and the fact that banking and ethics can be combined without being considered incompatible with each other.

1.4 Research objectives

The main objective of this research is ethical funding and micro-loans, as well as the transparency with which they are conducted. Sustainable development and the absence of social exclusions characterize ethical banks, which put the economy at the service of all citizens. The fact that in time of crisis, there are banks which do not aim at the huge profits but, however, developing, is object of research. Ethical banks redistribute the funds they collect in social, environmental and cultural projects. Although in Greece, the institution of ethical banks has not developed as in other countries, nevertheless both corporate social responsibility of the conventional banks and microcredit policy by cooperative banks must be a research objective. The researches about banks should not only be limited to their financial performance but should also extend to their social performance and behaviors.

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1.5 Aim and research question

The main aim of the study is to present a bank, which will be an example, due to its successful course during the economic crisis in Greece. This bank is the Cooperative Bank of Karditsa, which is the only member from Greece in the European Federation of Ethical and Alternative Banks. By analyzing the data of the particular bank, we try to show the reasons for its development in a period of crisis, and at the same time to emphasize the importance of cooperative credit system and micro-credits policy in our country.

The basic question that emerges from the study is whether they can succeed, banks based on micro-credits, promoting the social economy and strengthening the real and local economy. Can local cooperative banks, through a prudent and rational strategy, be part of the solution to the problem of the current economic crisis?

1.6 Definition of terms

The two basic terms in which we must stand and give importance are ethical banking and corporate social responsibility. With ethical banking, the solidarity and social standards precede and not the speculation. Economy concerns all citizens, without social exclusions. Ethical banks support innovative social and environmental projects and aim for an active and supportive society.

As far as corporate social responsibility is concerned, it refers to the efforts that businesses will have to make to align their aims with the aims of local communities. The well-being of local communities, through selective business practices, should be an objective of business in general and of banks in particular.

1.7 Dissertation outline

The first chapter of the dissertation is the introduction, which defines its objectives and research questions.

In the second chapter, we have a literature review of the economic crises and the social and ethical responsibility of the banks.

The third chapter analyzes the research methodology used in the dissertation.

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The fourth chapter refers to economic crises (previous and current) and capital controls.

The fifth chapter concerns the international and Greek banking sector as well as the current situation of the banking system in our country.

In the sixth chapter reference is made to the social and ethical responsibility of banks (which can coexist with new technologies in the banking).

The seventh chapter consists of the case study of the Cooperative Bank of Karditsa, where the capabilities of a local bank are presented, which managed and developed during of the crisis.

Finally, the eighth chapter describes the conclusions from the dissertation.

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2. Literature review of economic crises and social and ethical responsibility of banks

In the past century, the global economy has gone through many trials and most of the crises that marked it were directly linked to the financial system. The banking sector has a fundamental role in the development of the economy, but it should also play an equally fundamental role in the development of society. Many times we see the numbers prosper, but not people. The purpose of this dissertation is to examine whether a bank, having a social and human orientation, can at the same time have a successful course, especially in times of crisis. The research methodology followed is characterized as qualitative research, since it is a process of exploration and understanding through which an individual or social phenomenon is examined. On the contrary, quantitative research is characterized by the measurement of a phenomenon and after that by its quantification and generalization to the wider population (Paraskevopoulos, 1993; Marecek, 2003; Nomikou, 2016).

Given the fact that this is a qualitative research, the literature in this case has an auxiliary role. In contrast, literature plays an important role in a quantitative research, in terms of the determination of theory and the research hypothesis. In qualitative research, the researchers deliberately avoid from the beginning to occupy with the literature and the theories of the subject they are examining, so that they can be more open to understanding the perspective of the subjects of the research. In a qualitative research, the theoretical positions are not set a priori, but arise from the research data. Theories, of course, can be the trigger a qualitative research and be compared with the theoretizations that arise from the research (Isari and Pourkos, 2015).

So, in this dissertation, the literature gave the trigger to our research and helped us to compare theory with the theoretizations that emerged from this research. The literature starts with the first major crisis, known as the Wall Street Crash, which began with the collapse of the New York Stock Exchange, in 1929. Psalidopoulos and Loizos (2011) describe the situation of the era, both during of crisis and after the crisis. The price explosion that occurred in the New York Stock Exchange in 1928-1929 was without corresponding increase in business profitability. It should also be noted the absence in the

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control of procedures. The combination of these two led to the Great Crash in October 1929.

The impact of the Great Crash was the sharp fall in prices, the closing of the Stock Exchange, bankruptcy of banks and enterprises, while the unemployed in the USA reached 3 million in the 1930 and Increased at 12 million in 1933. The crisis has, of course, been transferred to the real economy, both within the USA and in other countries. In Great Britain, the crisis took the form of a monetary crisis, and there was also a fall in prices and an increase in unemployment.

The Hoover government, in order to cope with the crisis, increased customs duties and taxation and reduced public expenditure. At the same time, it tried to create positive conditions for business activities. The measures taken to fight the crisis were initially welcomed by liberal economists but were subsequently condemned because they reduced more the demand. The government of Great Britain tried to cope with the crisis with devaluation, which was held in September 1931 (35%).

Economic crises, however, broke out from other causes as well, more characteristic of the two oil crises of 1973 and 1979. Bakirtzis (2004) informs us that the first oil crisis erupted on the occasion of the Arab-Israeli war, which brought the oil embargo and the limitation imposed by the OPEC countries. While the second oil crisis erupted due to the upheavals that occurred from the revolution in Iran. In both cases, we had an embargo and a reduction in output from the OPEC countries.

The impact of the two oil crises was the large increase in oil prices, the further fall in oil production by the OPEC countries since 1979, high inflation, stagnation of production, high unemployment, increase in government deficit and the widening of the deficits in the balances of payments.

The oil crises forced Western economies to coordinate with each other, in order to change their economic policy (Psalidopoulos, 2014) and so the G-7 was created. The attempt to coordinate between Western economies was not, at first, successful due to the multidimensional form of the crisis. The efforts which were made according to the Keynesian model, in order to boost demand, had their disputation by the economists who supported the control of total demand, resulting in the prevalence of the “neoliberal”

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model and the rise to power of Margaret Thatcher in the United Kingdom and Ronald Reagan in the USA.

The recent crisis has also begun in the USA, with the collapse of the Lehman Brothers investment bank, but has quickly spread across the world, causing the worst recession since 1929 and a negative growth rate. According to Larosiere's report (2009), many were the factors that led to the recent crisis. First of all, excessive liquidity, as well as low interest rates, created an illusion of financial security. This, coupled with the emergence of complex investment products (with higher returns, but also with higher risk), created a housing “bubble”, as there was insufficient control over mortgage loans. The “bubble” was created because the collateral and guarantees of these high-risk, complex investment products were based on earlier securities of loans, of capitalized debts and of mortgages, and the difficulty of repayment them resulted of increasing the risk. With negative savings and a huge increase in mortgage loans, the result was intense imbalances in both the USA and the global economy.

Another important reason that led to the crisis was the huge errors made in assessing and costing the risks both from the firms that created these dangerous investment products (either because of ignorance or because of the bonuses and incentives of their executives) and by the competent bodies that were responsible for control and supervision, but failed to their mission. Even the supervision of IMF did not work effectively, while there was no coordinated action by the various bodies of economic policy. The opacity that existed in important parts of the financial markets created a “shadow” banking system. The role of Credit Rating Agencies was also important, after either because of erroneous estimates or because of interests, they rated the high risk products with the highest AAA grade, as if they were safe government or corporate bonds.

The impact of the recent crisis has been enormous, after it was the worst economic recession since the 1929 crisis, has been serious fiscal worsening in most countries, and for the first time in the post-war era a negative growth rate has been recorded (Bank of Greece, 2014). In most advanced economies, there has been a great recession, in the Euro- area there has been a negative rate of change in GDP and in the emerging economies there has been a significant deceleration in the growth rate of GDP. The biggest recession occurred in open economies due to the fall in international trade. Countries with macroeconomic imbalances and structural weaknesses have failed to cope with the impact

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of the crisis on their own (some of them needed external financial assistance), while in these countries there has been a very large increase in unemployment. Another impact of the crisis was the deterioration in fiscal aggregates due to the government measures and automatic fiscal stabilizers.

According to Vatikiotis (2011), in developing countries observed a decline in Foreign Direct Investment (but lower than in developed countries), commodity and food prices increased, and international development aid started to decline. There were also political directions from the IMF and the G-20 to reduce public expenditure, even to developing countries that had not been hit hard by the crisis.

This crisis mutated into a sovereign debt crisis and for Europe the problem is threefold: (i) lack of liquidity, (ii) stable deficits and debts, (iii) recession, slow growth and high unemployment (Bitzenis and Vlachos, 2015). The Greek economy was affected at the end of 2008, with public debt and deficit to have dramatically grown as a percentage of GDP to 129.7% and 15.7% respectively. Because of the delay in decision-making, press reports were even rising for the breakup of the Euro-area (Bank of Greece, 2014).

The recent crisis has been coped with the improvement of the institutional oversight framework of banks and the restructuring of the financial sector in many countries (Bank of Greece, 2014). In Europe, however, the hesitations of Euro-area governments and the European Central Bank led to the transformation of the financial crisis in a sovereign debt crisis. Euro-area governments have failed to give a clear message of assistance to those countries where their main macroeconomic aggregates had deteriorated (eg Greece, Italy, Spain), as a result the degradation them by Credit Rating Agencies and uncertainty in the international financial markets (Bitzenis and Vlachos, 2013).

The European governments have argued that only with austerity policies could the crisis be coped with and competitiveness and growth promoted. In the Euro-area, where currency devaluation cannot be achieved, austerity functions as an ‘internal devaluation’ mechanism. Austerity has been characterized by many major economists as an irrational policy, which further aggravates the economic crisis. European policies of the austerity have been accused of dragging the global economy into a recession and a trap of liquidity, thereby aggravating global imbalances (Milios, Lapatsioras and Sotiropoulos, 2017).

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With ‘shock therapy’ in Greece, the aim was to increase competitiveness and fiscal consolidation, as the main characteristics of the Greek crisis were low competitiveness and fiscal deficits (Bitzenis and Vlachos, 2015). But the solution is difficult under these circumstances, since EMU policies ensure the austerity and the interests of capital, while the absence of a central power and the existing coexistence framework within EMU increase the risk of default (Sotiropoulos, Milios and Lapatsioras, 2015).

Stiglitz (2014) argues that austerity policies threaten Europe with a long-term recession. These policies have failed, since it is observed subdued growth and high unemployment. While other economists refer to the different USA and UK fiscal and monetary policies that have improved their economies and reached the pre-crisis level.

The direct intervention of governments and central banks (mainly the USA) has made many believe that the state intervention of Keynesian type is coming back. However, according to Dourakis (2011), this view is wrong because the measures taken were a temporary deviation from the spirit and essence of economic liberalism. The primary objective of the states was to prevent the collapse of the international financial system, which would result in a deep and protracted recession. Thus, when profitability returned to the banks, the fiscal and monetary support measures have been withdrawn and the reduction of government debt and deficits was the primary objective. This was done without substantially reducing of unemployment and without strong recovery of the private sector. Two key objectives of Keynesianism are full and secure employment and the reduction of income inequalities. However, current economic policies do not have such objectives, as social spending has been reduced due to the huge amounts paid to save the shareholders of large failing banks. Thus, the states are socializing the losses of banks by burdening the taxpayers. Therefore, these interventions cannot be characterized as Keynesian because they do not serve the general interest of society.

One of the effects of the crisis in Greece was the imposition of capital controls in the summer of 2015, which was passed after the announcement of the referendum on the agreement with the country's creditors (Government Gazette 62A, 2015). The terms of capital controls were set out in detail with Government Gazette 65A (2015) and Government Gazette 84A (2015), while reports and photos from the press of those days (Huffingtonpost, 2015) showed the anxiety of people who were running panicky at the ATMs. The referendum passed to history (Ministry of Interior of Greece, 2015), with

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61.31% voting against the agreement, but capital controls continue to date, with slightly more relaxed constraints (Hellenic Bank Association, 2017). Relative research shows that almost half of the population has been affected by capital controls, and its confidence in banks is very low (Bank of Greece, 2017).

Banks should be primarily responsible for receiving deposits and granting loans (Papadakis, 2004), while their proper functioning is a basic prerequisite for the sound development of the economy (Georgoutsos and Staikouras, 2008). From the time of Byzantium (Lothian, 2002) and Middle Ages (Roussakis, 1997), up to our time (Reinhart and Rogoff, 2008), one of the main characteristics of money is its internationalization, with the banks having a leading role.

The first wave of globalization occurred in the second half of the 19th century, when multinational banking activity increased (Battilossi, 2006). Nowadays, the globalization of banks has increased very much, but the role they played in the recent 2007-2009 crisis (because of excessive risk-taking) has resulted in tighter restrictions (Demirguc-Kunt and Bertay, 2017). International banking sector, after a decade of increased globalization, has obvious signs of a downturn (World Bank, 2017).

As far as the Greek banking system is concerned, it is divided into four periods (Melas, 2012). Dertilis (2004), Kostis and Costelenos (2003), Kostis and Tsokopoulos (1988), Psalidopoulos (2014), the websites of Alpha Bank, Eurobank and Piraeus Bank, inform us of the banks established in the first period (1828-1927). Particular reference should be made to the establishment of the in 1841, in which, according to Valaoritis (1980), the first capitals invested in it were both Greek (eg Zosimas) and foreign (eg Rothschild). In 1879 the Bank of Kalamon was founded, which was the predecessor of today's Alpha Bank. In 1899 the Bank of Crete was founded in , which in 1919 (Government Gazette 74Α, 1919) started its merger with the National Bank of Greece, but it was never completed. Finally, George Koskotas became the owner of the bank, in 1984, resulting in the well-known scandal (Trivoli, 2015). In 1995 it was liquidated (Government Gazette 172A, 1995) and its good part was acquired by Eurobank (Lidorikis, 2012). We should also note the establishment of Hellenic Postbank in 1900, which played a leading role in saving of the Greek banking sector, as well as the establishment of Emporiki Bank (Commercial Bank) in 1907. At the same time, Piraeus Bank, Attica Bank and the Consignment Deposits & Loans Fund had been established and are still present.

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The first period ends in 1927 with the establishment of the Bank of Greece, which took over from the National Bank of Greece the privilege to issue money (www.bankofgreece.gr).

The second period (1928-1945) is characterized by the establishment of the National Mortgage Bank (www.nbg.gr) in 1928 and the establishment of the Agricultural Bank of Greece in 1929 (Government Gazette 283A, 1929). Since 1931 the banks operate only in the form of Public Limited Companies (Government Gazette 186A, 1931).

The third period (1946-1992) begins with the establishment of the Monetary Committee (Psalidopoulos, 2014) and the subsequent state intervention in the banks. The main features of this period are the emergence of a strong duopoly (Pagoulatos, 2006) between National Bank of Greece and Emporiki Bank (Commercial Bank), although in the decade 1956-1966 there has been significant growth in the banking sector, as well as the entry of foreign banks in Greece (Bank of Greece, 1978). During the political transition period, the Greek banking system continues to grow and almost all banks are under state control (Pagoulatos, 2006).

The fourth period (1992 to date) begins with the Treaty of Maastricht (1992). In the 1990s, privatization of banks began and their attempts to integrate into the united European banking area (Melas, 2012). During the same decade, cooperative banks (www.este.gr) are also emerging, while in the last years of this decade there are many mergers and acquisitions, which continued in the 2000s.

During the decade of 2000, there was the expansion of Greek banks, mainly in the Balkans and Eastern Europe, with acquisitions of foreign banks. The purpose of the acquisitions is the effort of companies to respond to the new economic conditions and to the changes in the strategy of their competitors (Bitzenis and Vlachos, 2012). With the acquisition, we have a direct acquisition of one business from another, and with the merger, usually one is larger than the other (Bitzenis and Papadimitriou, 2012). The expansion of Greek banks outside the country reached its highest point in 2006 (Papadogiannis, 2014). At the same time, we also had the acquisition of some Greek banks (Geniki Bank, Nova Bank and Emporiki Bank) by foreign banks (Deloitte, 2006).

Euphoria, however, quickly disappeared after the beginning of the Memorandums period, in 2010, while with the PSI of 2012 there was a big blow to the capital adequacy of the

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banks (Kakouris, 2014). The recapitalization followed, while those banks that failed to catch up with the required indicators levels were liquidated (Bank of Greece, 2014). A total of 14 banks (of which 7 were cooperative banks) were placed under special liquidation from 2011 to 2015 (www.pqh.gr), including the Agricultural Bank of Greece and Postal Savings Bank. The liquidation of all these banks was assigned in 2016 to PQH S.A. (Government Gazette 925B, 2016).

Today, our banking system is essentially composed of the four “systemic” banks (Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank) (www..gr). We also have the Attica Bank, the Consignment Deposits & Loans Fund and nine cooperative banks, with much smaller sizes.

In banks, as well as in companies in general, the management philosophy should focus primarily on people and then on systems and processes. Businesses should not have as the sole purpose the economic performance, as Friedman argues, but neither should they reach the other end and ignore the profit. That is why balance must be sought somewhere in the middle (Hasiotis, 1998).

As regards banks, they must have effective management to avoid serious risks to the economy, and their philosophy must determine by the meaning of the credit culture in the banking market (Zopounidis, 2009). Products and services should be proffered in a way that creates value for the customer and is a special experience for him. A typical example is Umpqua Bank in the USA (Armstrong and Kotler, 2011) which don't press its customers, like most banks do, and has set up its branches in such a way that the bank is likeable to the neighborhoods. Many of these are performing unusual activities, such as yoga and knitting lessons. Its rise demonstrates that a small bank can grow, having a human face and acting differently (Economist, 2014).

The development of the well-being of the local community should therefore be an objective of the banks, and this can be achieved within the framework of their corporate social responsibility (Kotler and Lee, 2009). The concept of corporate social responsibility emerged in the USA in the 1950s (Smith, 1994).

In our country, the Greek CSR Network was established in 2000 (www.csrhellas.net) and since 2008 the CSR best performance award began by the Corporate Responsibility Institute. In the past year, the first two positions were banks: Piraeus Bank and National

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Bank of Greece (Institute of Corporate Responsibility, 2017). A recent CSR survey has shown that customers either reward or punish businesses according to how they act (Institute of Communication, 2016), while another survey has shown that even businesses themselves, to a large extent, consider that there is possibility for the further development of CSR (ICAP Group, 2016). Banks now annually exhibit reports on CSR (Lidorikis, 2006). Thus, from their websites, we can see the basic areas, in which the CSR of Piraeus Bank, National Bank of Greece, Alpha Bank and Eurobank focuses.

Apart from their necessary human orientation, banks should also turn to technological orientation and try to combine both. Sinanioti-Mavroudi and Farsarotas (2005), Aggelis (2005), Mirtidis (2008) and Sirmakezis (2003) analyze the advantages of using of the new technologies in the banking sector. These new technologies are: internet banking, mobile banking, phone banking, EFT/POS and ATMs. With ATMs, we essentially had the introduction to e-banking. The first was operated in London in 1967 (Perdikaris, 2017), while in our time is the first choice for withdrawing money (Singh, 2014).

A bank with a human and technological orientation must, above all, put the economy at the service of all citizens and aim at sustainable development without social exclusion. This is the notion of ethical bank (www.febea.gr). Thus, according to Daroussos, the basic features of ethical banks are to finance disadvantaged people, such as the unemployed, and to grant microcredits to Third World citizens to help them escape poverty.

The first and most typical example is the Grameen Bank in Bangladesh, founded in 1983 by Muhammad Yunus (BBC, 2011). In 1997, the Grameen Foundation, with its ‘Bankers without Borders’ program, was set up to help organizations that fight global poverty (www.bankerswithoutborders.com). In 2006, Grameen Bank and Muhammad Yunus were honored with the Nobel Peace Prize for their efforts to create economic and social development from below (Nobel Prize, 2006). Some claim that micro-lending can’t save the world, but it only helps in extreme cases (MacFarquhar, 2010).

There are many ethical banks in Europe that founded the European Federation of Ethical and Alternative Banks (FEBEA) in 2001. Two of the best known are the Italian Banca Popolare Etica (www.bancaetica.it) and the Dutch Triodos Bank (www.triodos.com). In 2009, the Global Alliance for Banking on Values (GABV), which is an independent

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network of banks operating according to the principles of ethical funding, was also established (www.gabv.org).

In Greece, discussions about the creation of a ethical bank began in 2009 (Fotiadi, 2009) and finally, in 2015, the Cooperative Bank of Karditsa was the first and only Greek bank to date, which became a member of FEBEA (Mitra, 2015).

For this reason, the case study will concern the particular bank and the main data will be collected from its website (www.bankofkarditsa.gr), while data on the cooperative banks sector will be obtained from the website of the Association of Cooperative Banks of Greece (www.este.gr).

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3. Research methodology

The cause for the process of the research is a reflection and its effort focuses on answering a research question. The researchers must design the methodology they intend to adopt, both in terms of their reflection and the subject they are examining. Research methodology refers to those parameters that are related to the research effort of the researchers. These parameters concern both the general methodological approaches and the methods, techniques, procedures, materials and means that the researchers will choose to conduct their research (Dimitropoulos, 2004).

Research, according to its characteristics, is divided into in the following categories (Paraskevopoulos, 1993):

(i) As regards the practical exploitation of the results, we have the following categories:

 Applied research: its purpose is both the determination of the relationships that govern a phenomenon and the control of theories, in order to be able to draw conclusions.  Research with action: in this case, we focus on a specific issue and we aim to gain knowledge on this issue.  Basic research: this research leads to theoretical conclusions, after examining the deeper issues that exist in a problem.

In our case, we can say that research is characterized as basic, because we examined the problem of the banking sector and we ended up to the theoretical conclusion that there may be a socially oriented bank, which at the same time has a continued development.

(ii) As far as the purpose of the survey is concerned, we have the following categories:

 Exploratory research: its main purpose is to formulate a question in order to conduct further research.  Descriptive research: In this research category, the characteristics of a specific problem or a specific situation are assessed.  Experimental research: its main objective is to control cases.

The method of research in this dissertation is exploratory, as we are not only concerned with the assessment of the problem of banks. On the contrary, we raise the question of the social and human orientation of the banks, on which further research can be carried out.

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(iii) As regards the number of cases we are examining, we can distinguish the following categories:

 Sampling: they are based on data recorded for a subset of the general population.  Case study: in this category, we examine one case (one person, one business, one institution, etc.).

Clearly, this dissertation belongs to the case study category, since we examine at the case of only one bank (the Cooperative Bank of Karditsa).

(iv) As to the kind of empirical data collected by a research, we have the following categories:

 Qualitative: it is a process of exploration and understanding, through which an individual or social issue is considered.  Quantitative: this method is characterized by the measurement and quantification of social phenomena.

The research methodology used in this dissertation is the qualitative methodology. Qualitative research is for researchers the appropriate methodology to answer questions related to "Why?" and "How?" of the social phenomena. The qualitative method is an exploratory method. Case study is classified in the qualitative research methods, since it does not seek generalization of the results. This dissertation attempts to answer the following questions:

 “Why” should banks have a social and human face?  “How” can banks achieve this?

On the other hand, quantitative research is related to the systematic investigation of phenomena, through statistical methods, mathematical models and numerical data. Typically, a representative sample is used by the researchers and the results are generalized in the wider population (Nomikou, 2016). In this research, however, the purpose is not the generalization of the results, but the answer to the two above questions.

Three main points, in which the qualitative approach and the quantitative approach differ in the research methodology, are the following (Marecek, 2003):

 The aim of qualitative research is not to measure the phenomenon and then quantify its various aspects.

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 In the qualitative approach, we usually do not use inductive statistics and probability theory to confirm or deny a research hypothesis.  In a qualitative research we are not looking for the parametric dimensions of a phenomenon and the way in which we will divide it into the general population.

Usual stages of qualitative research are the following (Cohen, Manion and Morrison, 2011):

 Identification of the topic and the phenomenon of the research.  The literature review.  Planning the research question and collecting the data.  Identifying areas that are relevant to research.  Identifying sources of information.  Research and data collection.  Analysis of data.  Reporting the results and answers to the questions that arise from the research.  Creating a hypothesis for further research.

In this dissertation, the research question is whether a bank can have a social and human face and at the same time have a successful course (especially in time of economic crisis). So, through the above stages, research has been carried out, from which the prerequisites that need to exist emerged, so that we have a positive answer to our research question.

The research methodology, by which this dissertation was completed, was based on the following three tools:

1) Critical review of the literature Literature usually plays a fundamental role in a quantitative research. Its role is very important in identifying of theory and research hypothesis. In contrast, in a qualitative research the literature usually has an auxiliary role. The researcher often deliberately avoids, from the outset, the literature and the theories of the subject under consideration, so that to be more open to understanding the prospects of the subjects of the research. In qualitative research, theoretical positions are not set in advance, but arise from research data. Nevertheless, theories can be the trigger of a qualitative research and be compared with the theoretizations that arise from this research (Isari and Pourkos, 2015).

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This method was chosen in order to be discussed the theoretical and descriptive material of the dissertation and be compared the theories regarding their application. In essence, this is a critical evaluation of the previous research and a summary of the specific field with which the dissertation has been dealt with. Data of this method came from books, articles, published researches, and sources from the internet. In this way, the most important economic crises of the last century were examined and discussed, while with historical and financial data, the banking sector, both international and Greek, was presented. Also, with a published survey, citizens' view on capital controls in our country was presented, while two published surveys gave us elements on consumer and enterprises opinion on Corporate Social Responsibility. Finally, in order to understand the notion of different and alternative banks (which are more ethical and human), examples of four foreign banks were presented.

The advantage of this method is that we can achieve a judgment on the basic notions and theories that this dissertation deals with. On the other hand, its disadvantage is that there is no discovery of any new element or data, since we deal with and refer to already existing data and to previous researches. Alternatively, we could use the quantitative methodology process by collecting data from primary sources, in particular using a questionnaire. However, with a small and oral testing research, it was found that the topic of ethical and alternative banks was unknown. Thus, initially, it would must been given some general information to the respondents. Otherwise, the main body of the questionnaire would have been based on a completely theoretical background.

2) Comparative analysis In recent years, there has been an intense critique of the dichotomous presentation of qualitative and quantitative research and the methodological dualism it reproduces. However, defining qualitative research simply as an absence of numbers and in the absence of mathematical calculations means simply that qualitative research is negatively determined in relation to quantitative research. Thus, quantitative comparisons can be made even in the context of qualitative research (Isari and Pourkos, 2015). The comparison was used in the case study of the dissertation, which concerned the Cooperative Bank of Karditsa. In a case study we use a specific example to depict a theoretical approach. The Cooperative Bank of Karditsa is the most suitable example, not only because it is the only Greek member, in European Federation of Ethical and

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Alternative Banks, but also because it is the only bank that managed to have an upward and successful course during the crisis. Its main financial data, from 2010 to 2016, were compared with the corresponding data of the eight other Cooperative Banks of our country, in order to see its difference. Thus, we can say that in this way, this case study also was functioned as a sectoral study, since the data of all members of the Greek cooperative banking sector were presented and compared. The data were drawn from the annual financial statements of the banks, which are published on their websites, and the programs used to process them were Microsoft Excel and Microsoft Paint.

The basic advantage of this analysis is that we have a comparison of the data of the Cooperative Bank of Karditsa for many years (from 2010 to 2016), and, at the same time, we compare it with all the other cooperative banks. Its disadvantage is in the fact that perhaps it is tiring for the reader to check and compare the data of nine banks. Alternatively, we could compare the Cooperative Bank of Karditsa only with just another bank, so that it is not so tiring for the reader. In that case, however, its impressive course during the crisis would not have been properly depicted and it would have been reduced the value of this course.

3) Published interviews and presentations The case study includes the detailed study of a person, a group of people, a business, etc. In the frame of a case study, we can use different types of observation, study related documents or video, etc. So, in the frame of a case study, we have the ability to use a wide range of methods and techniques of research (McKernan, 1996). Interviews are one of the tools of quality research. They are based on the fact that the interviewee's capacity more ensures the validity of the information, rather than the mass representativeness of opinions (as is the case with quantitative research). The extraction of elements from newspapers can be said to be placed at the border between primary and secondary research. Systematic indexing of a category of thematic publications for a certain period of time is clearly a primary research, since we have produced new information from unprocessed material. On the contrary, references to opinions that have been published in the form of an article or in the form of an interview are secondary material, but of a particular nature in relation to scientific texts. The opinions of public figures (eg the interview of a mayor) can certainly be used, since they come from prestigious people who have great power of documentation. In primary research,

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especially in the social sciences, we collect raw and published material (eg interviews, statistical data, legislation) and then proceed to analyze and interpret it (Tsekos, 2016).

They were used in the case study to present the reasons that the Cooperative Bank of Karditsa not only did not shrink in the years of the crisis but instead expanded further. Through these interviews and presentations, the Bank's strategy was emerged, that has helped it succeed. The interviews and presentations of the Bank's executives (Mr. Georgios Boukis-Chairman of the Board, Mr. Panagiotis Tournavitis-Director General and Mr. Charalampos Fillos-Director General), from which important data were extracted, are the following:

1. ERT, 15.12.2015: New era for the Cooperative Bank of Karditsa. (G.Boukis, Ch.Fillos, P.Tournavitis) http://www.ert.gr/eidiseis/nea-epochi-gia-ti-sineteristiki- trapeza-karditsas/ 2. Avgi, 13.02.2016: Cooperative Bank of Karditsa. A bank with human face. (G.Boukis, P.Tournavitis) http://www.avgi.gr/article/10811/6263158/synetairistike-trapeza-karditsas-mia- trapeza-me-anthropino-prosopo 3. Reporter.gr, 04.02.2017: Cooperative Bank of Karditsa. A hidden diamond. (P.Tournavitis) http://www.reporter.gr/Eidhseis/Epicheirhseis/Trapezes/313594- Synetairistikh-Trapeza-Karditsas-%C2%ABEna-krymmeno- diamanti%C2%BB?tm%E2%80%A6

4. Mouzakinews.gr, Press Conference, 14.06.2017, (G.Boukis) https://mouzakinews.gr/συνέντευξη-τύπου-παραχώρησε-σήμερα-ο/

5. 2nd Conference on Social Economy and Social-Cooperative Enterprises, 22- 24.11.2013: Presentation for: Financial sector and creation of cooperative banks. (G.Boukis) https://www.youtube.com/watch?v=5yRRkEX07jc 6. Scientific Meeting on New Business Opportunities with the Guide Micro-credits (within the framework of the European Microfinance Day), 20.10.2016: Presentation for: Micro-credits in practice. (P.Tournavitis) http://www.livemedia.gr/video/258496

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7. FM 100.6 (Municipal Radio of Thessaloniki), 24.05.2016: Radio transmission: People's University of Social and Solidarity Economy. (P.Tournavitis) http://www.univsse.gr/2016/05/blog-post_24.html

From the interviews and presentations above, we should focus in particular on the radio interview given by the Director General of the Bank, Mr. Panagiotis Tournavitis, to FM 100.6 (Municipal Radio of Thessaloniki) on May 25, 2016. This is a full interview, lasting about one hour, in which too much information is presented and certainly, whoever will listen to it, will learn elements that did not know and will solve many questions.

The basic advantage of these interviews and presentations is that they have been given by senior executives of the Bank (by the Chairman of the Board and the two Directors Generals) and thus, we collect information and data from the most responsible executives. The disadvantage of six of the seven is the fact that these are relatively small interviews and presentations and if someone read or listen these, will probably not get all the information will may wish. But this disadvantage of the six interviews and presentations is covered by the radio interview to FM 100.6. Alternatively, we could have our own primary interview with an executive of the Bank. However, because it would have been an interview with a few questions, we would end up with the above disadvantage of the six interviews and presentations, and finally we would go back to the radio interview.

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4. The main economic crises (financial crises, oil crises, sovereign debt crises) that marked the last century, both the whole world and Greece

4.1 Previous economic crises: The Great Crash of 1929 in the USA (due to the collapse of the New York Stock Exchange) and the oil crises of 1973 and 1979 (due to the oil embargo from the OPEC countries)

4.1.1 The Great Crash of 1929

Causes of the 1929 crisis

 In 1928-1929, there was a price explosion in the Wall Street Stock Exchange in New York, since in November 1928 we had 5 million shares, while 13 million shares were traded in October 1929, but without a corresponding increase in business profitability.  This fact, coupled with the lack of process control, eventually led to the big financial crash of October 1929, known as the Wall Street Crash.

Impact of the 1929 crisis:

The impact of the 1929 crisis was as follows:  There was a sharp fall in prices.  The Stock Exchange closed.  Banks and businesses went bankrupt.  This crisis was also shifted to the real economy, as prices fell to 50% - 60%.  The unemployed reached 3 million in 1930, while in 1933 they rose to 12 million.  The crisis was also transferred to Great Britain in the form of a monetary crisis, where there was a fall in prices and rising of the unemployment.

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Figure 1: After the fall. The lingering bustle on Wall Street in November 1929. (Source: Credit Hulton Archive / Getty Images)

Ways of coping with the 1929 crisis:

The Hoover government in the USA tried to cope with the crisis in the following ways:  By increasing the customs duties.  By increasing the taxation.  By reducing the public expenditure.  By trying to create positive conditions for business.

This policy was criticized afterwards, because it further reduced demand. When these measures were taken, however, liberal economists supported them.

 On the other hand, Great Britain tried to tackle the crisis with a depreciation of the pound. Thus, in September 1931, the British pound has depreciated by 35% (Psalidopoulos and Loizos, 2011).

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4.1.2 The oil crises of 1973 and 1979

Causes of the 1973 oil crisis:

The first oil crisis broke out at the end of 1973 and the causes were as follows (Bakirtzis, 2004):  The Arab-Israeli war, which took place in the same year.  The oil embargo that followed.  The limitation imposed by the OPEC countries.

Cause of the 1979 oil crisis:

 The second oil crisis erupted in 1979, due to the upheavals that occurred since the Iranian revolution.

Figure 2: Oil price graph 1861-2007, which shows a sharp increase in 1973, again during the energy crisis of 1979. The orange line is adjusted for inflation. (Source: Wikipedia)

Impact of the two oil crises of 1973 and 1979:

Western industrial countries faced a multidimensional crisis due to the two oil crises of 1973 and 1979, with the following consequences:  Oil price was risen to a high level.  Since 1979, oil production by OPEC countries was fallen further.  High inflation.  Stagnation of production.

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 High unemployment.  Increase in public deficits.  Enlargement of the deficits in the balances of payments.

Ways of coping with of the two oil crises of 1973 and 1979:

 These two crises led the western economies to coordinate with each other, although the attempt at coordination at the beginning was not successful due to the multidimensional crisis.  Western governments tried to change their economic policy.  Group G-7 was created (USA, West Germany, Japan, United Kingdom, France, Italy and Canada).  Efforts have been made to boost demand, according to the Keynesian model.

These efforts, however, were against of supporters of control of the aggregate demand. This confrontation among economists eventually led to the prevalence of the so-called “neoliberal” model with the rise to power of Margaret Thatcher in 1979 in the United Kingdom and Ronald Reagan in 1980 in the USA (Psalidopoulos, 2014).

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4.2 The recent economic crisis

Cause of the recent economic crisis:

 The main cause of the crisis was the property market in the USA, which turned out to be a “bubble” that eventually exploded and created adverse effects on other sectors of the economy.  Thus, the crisis, which was first presented in August 2007, rapidly deteriorated in the autumn of 2008 with the collapse of the Lehman Brothers investment bank and quickly evolved into a global financial crisis.  Also, the inadequacy of the regulatory framework for the operation and supervision of the financial system should be noted, as it contributed to the crisis.

The factors that led to the recent crisis, grouped according to their origins from five different sources, are the following (Larosiere, 2009):

1) Macroeconomic conditions  Excessive liquidity and low interest rates in the USA have created an illusion and certainty of financial security. Controversial economic innovations appeared in the secondary market of stock exchanges, derivatives, etc.  Continued credit expansion and low interest rates have created a housing “bubble”, as there was a lack of regulation and control of the housing mortgage loans.  Savings were negative anymore in the USA, while mortgage lending quadrupled from 2001 to 2005.  Thus, there were intense imbalances in both the USA and the global economy, while the growing USA debt was covered by inflows of foreign capital, mainly from China.  Complex investment products were created, which offered higher yields, but as it turned out later, they also had particularly high risks. Their safety and guarantees were based on earlier securities of loans, capitalized debts and mortgages, and the difficulty in repaying them has increased their risk of default.  The production of these high-risk products has been extended to the whole financial sector and has had a severe impact on banks' capital stocks.

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2) Risk management  The financial firms that created these products had done tremendous mistakes in assessing and costing the risks.  The bodies that were responsible for control, regulation and supervise failed completely in their mission.  The particular complexity and multi-layered structure of these products, made difficult to understand and control them.  The opacity of significant parts of the financial markets and their tools had resulted to create in a “shadow” banking system.  The failure of the “Basel I” framework (although partially it corrected with “Basel II”) has caused a huge increase in high-risk products.  Banks gave loans to borrowers, but it was clear beforehand that they could not repay them, while at the same time underestimating the most basic risks.

3) The role of the Credit Rating Agencies  The Credit Rating Agencies downgraded the risks of structured products, since they rated them with the highest AAA grade, as if they were secure government or corporate bonds.  Their methodologies worsened even further because of the interests of the Credit Rating Agencies and because of the requirement of the regulatory authorities from some investors in order to invest in AAA-rated products.

4) Failures of corporate governance  The ignorance of boards of directors and senior executives of financial firms for these new complex products led to erroneous estimates of credit risks.  The bonuses and incentives given to financial institution executives, as well as the pressure of the shareholders to the boards of directors for higher profits, contributed to the excessive risk taking.

5) The failure of regulators and supervisors to manage the crisis  The regulatory authorities did not show the necessary attention to the consequences of dangerous products since focused on some companies, while the phenomenon was systemic.  Explosive growth of these products had resulted to limit the capabilities of control.

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 The authorities had neglected to update their required rules in good time so that the controls are fuller.  The supervision of IMF did not work effectively and there was no collective action by institutions of economic policy.

Impact of the recent economic crisis:

The impact of the recent economic crisis was as follows (Bank of Greece, 2014):  The greatest economic recession has been caused since the 1930s.  There has been a serious fiscal deterioration in most countries.  The impact of the crisis was unfavorable to all the world's economies, and in 2009, for the first time in the post-war period, the global economy recorded a negative growth rate.

Most countries with developed economy entered a deep recession, while in emerging economies the growth rate of GDP has slowed markedly. In all Euro-area countries there was a negative rate of change in GDP. The biggest recession was seen in the most open economies, because they have been hit by the sharp fall in world trade (10.7% in 2009). Of course, the most open economies were the first to have benefited from the recovery of the world economy and world trade, which began in 2010. By contrast, countries with serious external and internal macroeconomic imbalances as well as structural weaknesses did not have the resistance and flexibility required to cope with the impact of the financial and economic crisis on their own and thus benefit from the recovery in global economy and international trade. So, on the one hand, countries that had sound basic economic data managed to re-enter the development path soon, but countries with large macroeconomic imbalances and structural weaknesses faced significant difficulties. In some cases, these countries even needed external financial assistance.

Big difference was also observed in the employment sector, as economies with sound economic data and a satisfactory degree of flexibility managed to keep unemployment rates low. On the contrary, economies with serious structural weaknesses had a sharp increase in unemployment.

The deterioration in fiscal aggregates was important, both because of government measures to boost economic activity and support the financial sector and because of the

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operation of automatic fiscal stabilizers. In advanced economies, the government deficit, as a percentage of GDP, rose from 3.5% in 2008 to 8.8% in 2009 and then declined to 5.9% in 2012. In the USA there was an increase from 6.5% in 2008 to 12.9% in 2009 and then fell to 8.3% in 2012. In the Euro-area, from 2.1% in 2008, it rose to 6.4% in 2009 and fell to 3.7% in 2012.

The global economic crisis had not left the developing countries unaffected. The impact of the crisis on these countries can be identified in the following fields (Vatikiotis, 2011):

 The Foreign Direct Investments decreased. However, in total of the Foreign Direct Investment, flows to developing countries declined at a slower rate than flows to developed countries.  The impact of crisis in the migrant remittances to the developing countries was not as dramatic as expected, as their fall of 5.5% in 2009 was oversubscribed in 2010 when they grew by 6%.  The prices of commodities increased (39% in 2010), causing food prices to rise in the poorest developing countries.  International development assistance to these countries begun to be reduced, further increasing the poverty problems they face.  Developing countries, which have had strong economic relations (either because they are bordering on or because of historical ties) with developed countries hit by the crisis, have been more affected.  There have been policy directions from the IMF and from the G-20, even in developing countries that have not been so severely hit by the crisis, about the need to reduce public expenditure.

This economic crisis has turned into a sovereign debt crisis. In Europe, the result was the emergence of a triple problem.

 Firstly, capital inadequacies in European banks have hindered financial flows, with the result that banks are unable to provide liquidity.  Secondly, the growth of fiscal deficits and debts could not be successfully curtailed by economic austerity policies, as the latter have a negative impact on economic development and so the deficit or debt is not diminishing.

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 And thirdly, recession and slow development are still persistent in Europe, and long-term unemployment is at dangerous levels (Bitzenis and Vlachos, 2015).

The global financial crisis began to negatively affect the Greek economy, notably after October 2008. At that time, it had been not perceived the gravity of the situation and the risk of turning the international banking crisis into a debt crisis in countries with high deficits and debts, such as Greece. The situation for our country in 2009 was unfavorable, as:

 The deficit rose to 15.7% of GDP.  The public debt climbed to 129.7% of GDP.

The reports on the expansion of the crisis in other countries, including the dissolution of the Euro-area itself, were increased, as the taking of the measures by Greece and the support decisions by European Union were delaying (Bank of Greece, 2014).

The chart below depicts the increase in sovereign debt since 2008. In the European Union as a whole, from 60.8% of GDP in 2008, it increased to 83.2% of GDP in 2016. The situation in Greece was much worse, since the debt from 109.4% in 2008 it increased to 180.8% in 2016.

Figure 3: Sovereign debt as percent of GDP (Source: Eurostat)

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Ways of coping with of the recent economic crisis:

The recent economic crisis has been coped with in the following ways:

 The institutional framework for regulating and supervising the global financial system was improved.  The financial sector was supported and restructured in many countries (Bank of Greece, 2014).  In Europe, however, the transmutation of the economic crisis, firstly in a financial crisis and eventually in a sovereign debt crisis, has been affected by both the hesitations and ambiguities of the governments of Euro-area and the European Central Bank (ECB). The governments of the Euro-area have failed to give a clear signal that they were ready to support Greece, but also and other countries, in which had been aggravated their macroeconomic fundamentals (eg Italy and Spain). The failure of the governments of the Euro-area and institutions of the Economic and Monetary Union (EMU) to provide a plan for the worst case scenario led to a downgrade from rating agencies and caused uncertainness in the international financial markets (Bitzenis and Vlachos, 2013).  Political authorities in the European Union and the Euro-area argued that only the policies of the austerity were able to neutralize the crisis and promote both ‘competitiveness’ and the process of the export-oriented growth. In the Euro-area, where the currency devaluation isn't possible, the austerity is seen as a mechanism of ‘internal devaluation’ of wages and commodity prices. Consequently, a positive current account balance and a process of export-oriented growth will be applicable through policies of austerity. Austerity was criticized by many economists as an illogical policy, because farther deteriorates the economic crisis, as a result the creation a vicious circle of falling demand, recession and over-indebtedness. Furthermore, European policies of the austerity were accused of turning the global economy into a recession and a trap of liquidity, exacerbating global imbalances (Milios, Lapatsioras and Sotiropoulos, 2017).  Taking into account the fact that the low competitiveness and fiscal deficits are the definition of the Greek crisis, then the ‘shock therapy’ that is proposed in the case of Greece aims at the following (Bitzenis and Vlachos, 2015):

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 Increasing competitiveness through reforms that will improve the efficiency of the public administration and promote the liberalization of the markets and through internal devaluations, as the devaluation is impossible due to the common currency.  Promoting fiscal consolidation for the implementation of the Stability and Growth Pact.

The question is how they can be implemented within a peculiar European Monetary Union, characterized by a lack of central authority without the typical characteristics of a capitalist state. Within EMU there is a cohabitation framework that increases the risk of default, ensures austerity and aggressively promotes the interests of capital (Sotiropoulos, Milios and Lapatsioras, 2015).

Nobel laureate economist Joseph Stiglitz claimed in 2014, at the 5th Congress of the Nobel Laureates in Germany, that the Euro-area is threatened by a long-term recession due to the austerity policies that have been implemented and which have failed completely, for as much as it is observed subdued development and high unemployment. Other economists at the same congress reported the United States and the United Kingdom, which managed and reached the pre-crisis level, pursuing a different fiscal and monetary policy (www.naftemporiki.gr).

The immediate intervention of governments and central banks (mainly of the USA) to save the global economy from the worst crisis of the past eighty years, made many believe that the state intervention of Keynesian type is coming back. This is an entirely epidermal and erroneous estimate. The intervention policy of states, as it turned out, was primarily aimed at preventing the collapse of the international financial system, which would lead the global economy to a deep and prolonged recession. The spirit and the essence of the new economic liberalism have never been controverted. The measures constituted a temporary deviation from the established rules, solely to prevent the possibility of systemic collapse. Thus, before the coveted strong recovery in the private sector and before the substantial reduction in unemployment, as soon as the banking system returned to profitability, governments quickly withdrawn the fiscal and monetary support measures and set as primary objective of reducing government deficits and debts. Keynesianism, as a socio- economic philosophy and a model of socio-economic organization, is not only determined by the means of economic policy it uses, but also by the aims it pursues. And two of its

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main aims are full and secure employment in a free society and the drastic reduction of income inequalities to prevent the possibility of social outbursts. Today's economic policies do not set such an aim, as policy-makers do not realize that the root cause of this crisis is the terrible income inequalities and the monstrous model of the “loan prosperity”. Thus, from the already deficit budgets, trillions of dollars were removed to be saved the shareholders of the big failing banks without any serious exchange. This led to a dramatic reduction in government expenditure on wages, pensions, health, education, environment and infrastructure, in order to reduce government deficits and debts that had skyrocketed, so that to realize the “big bailout”. Thus, from the Keynesian safety net for the workers (welfare state), we went into the neo-liberal safety net for the bankers, as the states socialize the bank losses by burdening the taxpayers. Thus, state interventions of this kind cannot be characterized as Keynesian, as they do not serve the general interest of society but the same exactly specific interests that the system of the (supposed) self-regulating market served before it collapses (Dourakis, 2011 ).

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4.3 The imposition of capital controls

One of the results of the economic crisis in Greece was the imposition of the capital controls. In February 2015, the newly elected Greek government began to negotiate with the three institutions, which are the lenders of our country (European Commission, European Central Bank, International Monetary Fund). After four months of converses without an agreement, the Greek government announced on 26 June 2015 a referendum on the acceptance or not, the draft agreement proposed by our lenders. The date of the referendum was July 5, 2015 (Government Gazette 62A, 2015).

Figure 4: Queues at ATMs, with the announcement of the referendum (Source: Huffingtonpost)

As soon as the referendum was announced, many people ran panicky at the ATMs in order to withdraw their deposits (www.huffingtonpost.gr). That was because the general feeling that prevailed in those days was that the essential question of the referendum was whether or not our country would stayed in the Euro-area. The sense of the risk of a possible exit of Greece from the Euro-area made the problem of continued withdrawals from banks even more intense. The problem has been in the past months because of the uncertainty of the negotiations with the lenders, but it became even bigger, with the announcement of the referendum. The government, seeing the unfavorable situation in the banks, and in order to protect them from lack of liquidity, proceeded to the announcement of the short-term bank holiday (Government Gazette 65A, 2015). While the initial plan was for banks to remain closed from June 28 to July 6, the bank holiday eventually lasted until July 20. The only

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exception was the payment of pensions, and for that reason only, some branches were remained open. During the bank holiday, the following tasks could be carried out:

1. Cash withdrawals from ATMs with a daily limit of 60 euros per card. 2. Transactions without limits using credit and debit cards for payments in Greece. 3. Payments with prepaid cards, but up to the amount that appeared as a remainder when the bank holiday was started. Also, issuing of new prepaid cards was stopped. 4. Transactions through web banking or phone banking, for payments in Greece. 5. Cash withdrawals from ATMs, with cards issued outside Greece.

In the event of breach of the restrictions imposed, the Bank of Greece imposes a fine on the relevant credit institution, equal to one tenth of the transaction and at the same time the contract of the employee who committed the infringement must be terminated.

Under these conditions, the referendum was held on July 5 with citizens rejecting the draft agreement of creditors with 61.31% (www.ekloges.ypes.gr). But the banks did not open the next day, as initially planned, but they were closed for two more weeks and opened on July 20th. However, restrictions on banking continued to exist and the details about reopening of the banks and transfer of funds were defined (Government Gazette 84A, 2015).

So, the notion of capital controls was entered into our lives. Restrictions on cash withdrawals and capital transfers, after the bank holiday ended, were as follows:

1. Cash withdrawals from bank branches and ATMs that exceeded 60 euros per customer per bank per day were not allowed. It was also possible for cumulative withdrawals, but up to 420 euros per week. 2. In the case of checks or payments based on letters of guarantee, the amounts were deposited in bank accounts and the restrictions on cash withdrawals were the same. 3. Withdrawals with credit and prepaid cards were prohibited. 4. The transfer of funds and cash outside Greece, as well as the transfers of funds for cross-border payments with credit, debit and prepaid cards, were prohibited. The use of credit and debit cards was allowed for purchases abroad, up to the maximum limit applicable to each bank.

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5. It was forbidden to open new deposit accounts and sight accounts, adding co- beneficiaries to existing accounts and activating dormant accounts. The opening of new accounts was only allowed for specific cases and conditions (such as payment of salary, payment of new pensions or allowances, servicing newly founded legal entities. 6. Early repayments of loans, in whole or in part, were not permitted unless they were carried out in cash or by remittances from abroad. 7. Early expirations of term deposits were forbidden, partially or totally. Provision was made for early expiration of time deposits only in certain cases (payment of equivalent debts to the State, payment of current and overdue loans to the same bank, payment of payroll to the same bank, payment of hospitals and tuition fees, payment to suppliers having an account with the same bank).

Capital controls continue to date with some changes. From time to time the Bank of Greece announces any changes that make restrictions of the capital controls more relaxed. Having now entered the third year of capital controls, most restrictions, in general, continue to apply. The changes made are as follows (Hellenic Banking Association, 2018):

1. Cash withdrawals from bank branches and ATMs are allowed up to € 2,300 euros per month per depositor per bank. It is also allowed to withdraw money with a debit card abroad, subject to the restrictions in force in Greece. 2. Internet transactions can also be made for purchases from abroad, except in some cases (money transfers outside Greece, auctions and art purchases, bets and gambling, jewelry purchases, pornographic material purchases, services of personal escorts and rendezvous, payments to charitable organizations, purchases of food services). 3. Account opening and adding a co-owner to an existing account, regardless of the creation of a new client code, is permitted. 4. Can be take place early repayment of loans and early expiration of term deposits. 5. The transfer of cash abroad is allowed, up to 2,300 euros (or the equivalent if it is a foreign currency) per person and per trip. 6. Sending remittances abroad be allowed up to 2,000 euros per two months, up to 2,000 euros per month for health or serious social reasons and up to 5,000 euros per quarter for tuition fees. In the latter case, if the credit is made to an account of

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student or an account of lessor of the residence, the transfer may be up to 8,000 euros per quarter.

In a survey conducted on behalf of the Bank of Greece between July and September 2017, it appears that the most citizens are not sufficiently informed about the restrictions in force. While 52% know what the cash withdrawal limit is, only 15% know about the monthly limit for transferring money abroad. Almost half (48%) were affected by the restrictions, since they often, or almost always, cash runs out, while 69% said restrictions on remittances abroad had no impact on their households. Also, 62% said it has reduced the use of cash after capital controls. As regards the level of confidence, this was low, both in the short-term prospects of the Greek economy (38%) and in the domestic banking system (36%). Finally, 59% believe that there will be restrictions for the next two years, while to return money from abroad to the Greek banks, there should be development of the Greek economy, according to 56%, and there should be stability of the banking system, according to 44% (Bank of Greece, 2017).

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5. The banking sector

5.1 The international banking sector

The financial system carries out all those services that are necessary to transfer funds from surplus units to deficit units. It concentrates the excess capitals of the economy and feeds those who need them, either for investment purposes or for consumer purposes. In essence, they intervene between the savings units and the financial units that need capitals and therefore borrow. Once funds have been concentrated from the first units, they are appropriately shaped and then channeled to the second units. In recent years there have been significant changes in the global economy, related to the modernization and liberalization of the financial system, the core of which is the banking sector. The proper functioning of the banks is a prerequisite for the sound development of the economy (Georgoutsos and Staikouras, 2008).

If we want to formulate the definition of the bank, we would say that it is the organization that has as its current activity the acceptance of deposits and the granting of loans (Papadakis, 2004).

Although the above definition very simply and with a few words explains what bank activities should be, in practice most banks worldwide have expanded into the creation of products and services that posed excessive risks both to them and to the economy in general.

We can say that the internationalization of money first appeared in the 4th century, when the emperor of Byzantium Constantine introduced a coin (known as solidus, bezant or nomisma), which was essentially used as an international currency in the region of Mediterranean (Lothian, 2002).

During of the Middle Ages, banks that were developed in local city-states tried to expand, both functionally and geographically. This effort has contributed to the development of international trade and the financing of state debts. In the 15th century, for example, Medici Bank from Florence had branches in Rome, Venice, London, Avignon, Geneva and Bruges, and through its network, liquidity was distributed by the papal deposits. German banks (eg Fugger) appeared in the 16th century, which provided credit to the

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industry and partially replaced the services of Italian banks. In the 17th and 18th centuries, the Dutch banks, in addition to financial trade, also were financing foreign governments. At the end of this period, they were sharing the financing of these loans with traders and wealthy and were selling these bonds through the Amsterdam Stock Exchange all over Europe. Thus, we had the first examples of syndicated loans and underwriting of securities (Roussakis, 1997).

At the beginning of the 19th century, the long-term financing needs of industrial investment were tackled by issuing bonds and shares, mainly in London. Baring Brothers was one of the most important banks in this field. Receive of capitals from London, was also common practice for the foreign governments (Reinhart and Rogoff, 2008). In second half of the 19th century, the first wave of globalization appeared, as multinational banking activity was grown very much. Thus, foreign branches of British, French and German banks increased from 525 in 1880 to 1,610 in 1913 (Battilossi, 2006). The existence of the system of the Golden Standard in many countries has prompted capital to move around the world almost freely due to monetary stability and reduced exchange rate risk. In the 20th century, American and Japanese banks have emerged as global banks and have led, over the last decades, to the trend of globalization.

In the decade before the global crisis of 2007-2009, the main features were the very large increase of the globalization of credit institutions and the dramatic increases of their size. International banks had been the cornerstone of many financial systems worldwide, and of course the developing countries as well. Those who were supporting international banking focused on the benefits that foreign banks generated in terms of the capital, know-how and technological improvements. Thus, they believed that there would be more competitive banking systems, improved resource allocation and economic development. But the global economic crisis refuted them and had been a significant re-evaluation of their theory. Due to the crisis, we have had the reaction against globalization in general, but with an emphasis on the role played by international banks in the transmission of the crisis. Global banks were criticized for taking excessive risks. The Financial Stability Board (FSB) and the G-20 voiced their concerns over the problems of over-sized banks. The result of all these was to strengthen regulations and restrictions in many countries and especially in developing countries. The international banking sector, after the crisis, has bend and the trend of banking globalization has, in part, reversed. While, on the one hand, the

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expansion of banks from high income countries is decreasing, on the other hand, banks in developing countries continue to expand (Demirguc-Kunt and Bertay, 2017).

This reversal of the international banking sector is depicted in the following figure, from the Report of Global Financial Development 2017-2018 of World Bank, entitled ‘Bankers without Borders’. The main conclusion of this report is that the international banking sector, after a decade of increased globalization, had obvious signs of a recession as a result of the latest global financial crisis (World Bank, 2017).

Figure 5: Cross-Border and Local Claims by Foreign Banks, 2005–2015 (Source: World Bank)

With regard to the ‘Bankers without Borders’ report, it should be emphasized the comment of the World Bank that it is not linked to ‘Bankers without Borders’ program of Grameen Foundation, which employs volunteer consultants to transfer the their know-how to serve non-profit organizations and social enterprises in poor countries. It proposes we visit the relative website for more information (https://www.bankerswithoutborders.com). Thus, indirectly, through the World Bank, we learn about Grameen Bank, the so-called Bank for the Poor (www.grameen.com), and more generally about the existence of a different banking world, to which we will refer to other chapter.

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5.2 The banking sector in Greece

The Greek banking system could be said to be divided into four time periods (Melas, 2012). The first period concerns the period since the establishment of the modern Greek state in 1828 and reaches until 1927, when the Bank of Greece was founded, with the aim of finding solutions to the economic problems that the country was facing at that time. The first period coincides with the era of economic liberalism, where there is a lack of government concern in the banking sector.

The second period begins in 1928 and extends until the end of the World War II. The main feature in this period is the regulation of the organization of banks. By law 5076 of 1931 (Government Gazette 186A, 1931) the banks could operate only as public limited companies. Until the end of the World War II, the largest banks were nationalized and thus most of the banking system came under state control, either directly or indirectly.

The third period of the Greek banking system expands from 1946 to 1992. The main feature of this period was the intense and systematic government intervention in the banking sector. The presence of state in the operation of the banks became more intense in the 1950s and 1960s, when the Monetary Committee was established (which was abolished in 1982). It was responsible for the conduct of monetary policy and the control of commercial banks.

The fourth period begins in 1992 with the start of the Maastricht Treaty and reaches today. In this period, the main feature is the modern perception of banking financial management.

The first Greek bank was the National Financial Bank (Ethniki Chrimatistiki), which was created by Ioannis Kapodistrias in 1828. The bank, however, dissolved after a few years (in 1833) because its financial sources were exhausted and could not substitute them for new (Dertilis, 2004).

In 1839, the Ionian Bank was founded, to which it was granted by the English the privilege of issuing banknotes (since the islands of the Ionian Sea were then under English domination still). At the same time, it could carry out the classic operations of the commercial banks. When the Ionian Islands were united with Greece in 1864, its publishing privilege expanded throughout the country. In 1920, however, its publishing privilege was transferred to the National Bank of Greece and it only remained its commercial banking operations (Kostis and Kostelenos, 2003).

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Two years after the founding of the Ionian Bank, the National Bank of Greece was founded in 1841. It held the privilege of issuing the banknotes until 1928, when the Bank of Greece took over the issue. Thus, until 1928 it was the main lender of the Greek State. At the same time, it was practicing all the classical functions, since it was also a commercial bank (Kostis and Costelenos, 2003). National Bank of Greece was the first private bank and the funds invested in it were both Greek and foreign. First shareholders of the bank were both Greeks, such as Nikolaos Zosimas, and foreigners, such as the brothers Rothschild (Valaoritis, 1980).

In 1872, the General Credit Bank (Geniki Pistotiki Bank) was established, which came from the rapid merger of Bank of the Valτatzis Group and the Bank of the Syggros Group. The two merged banks were also founded in 1872 (Kostis and Costelenos, 2003).

In the following year, the Bank of Industrial Credit was established with main orientation the financing of the industry, which took its first steps. In 1906 it was absorbed by the Bank of (Kostis and Tsokopoulos, 1988).

In 1879 the Commercial House I.F.Kostopoulos was founded in Kalamata, which apart from its commercial activities, has also developed banking operations and was the predecessor of the Bank of Kalamata. The bank was renamed as a Hellenic Commercial Credit Bank, then a Credit Bank, while its current name is Alpha Bank (www.alpha.gr).

In 1882, the Preferred Bank of Epirus-Thessaly was founded, with main shareholder, Andreas Syggros and its headquarters in Volos. It had the privilege of issuing banknotes in Thessaly and in the Prefecture of Arta (they had been liberated in the past year). It is a typical example of the way in which Greek colonial capital intervened in the economic evolutions of the country, at that time. In 1900 it merged with the National Bank of Greece, in which transferred the privilege of issuing (Dertilis, 2004).

In 1893, the Bank of Athens was founded, which was essentially the first Greek bank to receive deposits. It was a pioneer in the introduction of new banking products and had relations with industry and shipping. In 1953, it was merged with the National Bank of Greece, of which it was the only substantive competitor (Kostis and Kostelenos, 2003).

In 1899, with the cooperation of the National Bank of Greece and Hambros Bank of London, the Bank of Crete, based in Chania, is founded, having the exclusive publishing privilege of banknotes in the autonomous Crete. The publishing privilege preserved it after

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1913, when Crete united with Greece, until 1919, when the privilege was transferred to the National Bank of Greece. From 1919, when merging with the National Bank of Greece (Government Gazette 74A, 1919) until 1962, it was in a liquidation and merger regime without ever being completed. In 1970, however, it was started again and in 1984 it was bought by George Koskotas, who was the protagonist of the biggest banking scandal of the last decades, since he had subtracted about 32 billion drachmas from the bank. This particular scandal, however, also had political implications, as Prime Minister Andreas Papandreou was led to the Special Court, among other politicians, due to the favorable treatment of the bank from government (Trivoli, 2015). The bank was placed in trusteeship in 1988, and in 1995 it was placed in liquidation (which has not yet finished). Simultaneously, a new bank was established, in which the claims and liabilities, only from banking operations, were transferred from the old bank (Government Gazette 172A, 1995). In 1999, the new Bank of Crete merged with Eurobank (Lidorikis, 2012).

In 1899, the Raisin Bank (Stafidiki Bank) was established, in the middle of the crisis of the raisin, in order to lend the producers, but in 1904 it collapsed (Psalidopoulos, 2014).

In 1900, Hellenic Postbank was founded in the autonomous then, Crete, and in 1909 was also founded in the Greek territory. In 1914 the base of its operations was transferred from Crete to Athens. Over the next decades, it played a leading role in the overall savings of the Greek banking sector. In 2013 it split into good and bad bank. The good bank was merged with Eurobank-Ergasias (www.eurobank.gr), while the bad bank is under liquidation.

In 1904, with the cooperation of the National Bank of Greece and the National Bank of Germany, the Bank of the East was established, which was eventually absorbed by the National Bank of Greece in 1932. In the following year, Popular Bank (Laiki Bank) was founded, which turned to the banking activities that concerned the popular classes.

In 1907, Commercial Bank (Emporiki Bank) was established, which from the 1950s and for five decades will be the second largest bank (after National Bank of Greece) and will play an important role in the actions of the Greek economy. In 2006, it was acquired by the French bank Credit Agricole, and in 2013 it was absorbed by Alpha Bank.

In 1916, Piraeus Bank was established, which for many decades was operating as a private bank. In 1962, it was acquired by Commercial Bank (Emporiki Bank), in 1975 it went

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under state control and was privatized, again, in 1991. Since then it has been continuously developing its operations and today, after multiple absorption of other banks, it is a leader in Greek banking market (www.piraeusbankgroup.com).

After World War I, the Greek banking sector was developed and expanded, since from 1918 to 1926, twenty nine new banking institutions are created. Among these were the Attica Bank and the Consignment Deposits & Loans Fund, which exist to date.

In 1927, it was considered as a hub for the Greek banking system, due to the establishment of Bank of Greece, which started operating next year, exercising the tasks of the Central Bank and receiving by the National Bank of Greece the privilege of issuing money. It has the form of a Public Limited Company and since 2001 it has been a member of the Eurosystem, which includes the European Central Bank and the Central Banks of the Euro-area countries (www.bankofgreece.gr).

In the same year, National Mortgage Bank of Greece (Ethniki Ktimatiki) was established by the National Bank of Greece, in order to finance the mortgage credit in Greece. In 1993 it was absorbed by National Bank of Greece (www.nbg.gr).

At the same time (1929), the Agricultural Bank of Greece was established under a contract between the Greek State and the National Bank of Greece (Government Gazette 283A, 1929). It was established as a not-for-profit organization of public interest. For decades, it strengthened the agricultural sector, until it was split into a good bank and bad bank in 2012. The good bank was acquired by Piraeus Bank, while the bad bank is under liquidation.

In the period 1929-1932, there was the great financial crisis, which surely influenced the Greek banking sector and the lack of a supervisory mechanism proved. For the first time, a strict legal framework was introduced and since 1931 the banks functioned only in the form of Public Limited Companies (Government Gazette 186A, 1931). During the World War II and the German-Italian occupation, the Greek banking system subsided, having shrunk the commercial and industrial sectors.

In 1946, the Monetary Committee was established, with the initial aim of issuing new banknotes. However, since the early 1950s, it exercised control and intervention policy, since it received powers about liquidity of the economy and monetary stability. The special position of the Monetary Committee was finally abolished in 1982 and its tasks

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were shared between the Bank of Greece and various governmental departments (Psalidopoulos, 2014).

During the 1950s, the oligopolistic structure of the Greek banking system was strengthened. This reinforcement started with the compulsory, from the state, merger of National Bank of Greece with the Bank of Athens in 1953, resulting in the creation of a huge bank, which was under full state control. At the same time, the Andreadis Group acquired the majority of Commercial Bank (Emporiki Bank). In 1957, Commercial Bank (Emporiki Bank) acquired the Ionian Bank, which in the meantime had merged with Popular Bank (Laiki Bank). Thus, a strong duopoly emerged between the National Bank of Greece and the Commercial Bank (Emporiki Bank), which dominated the next decades (Pagoulatos, 2006).

In 1952, the Bank of Professional Credit was established, which was acquired in 1962 by the National Bank of Greece. In 1992, it was renamed Bank of Athens (synonymous with the oldest Bank of Athens that was established in 1893) and eventually merged with Eurobank (www.eurobank.gr) in 1999.

In 1962, the Bank of Investment was established, and the next year National Bank of Investment of Industrial Development (ETEBA Bank) was established. In 1964, the Hellenic Bank of Industrial Development (ETBA Bank) was established as a public organization, in which the operations of the Organization of Financing of Economic Development, of the Organization of Industrial Development and of the Organization of Tourist Credit were gathered (Bank of Greece, 1978).

In the decade from 1956 to 1966, the Greek banking system showed a significant increase, which is depicted in the table below. Looking at the data of the largest banks of the time, we see that the differences are evident between 1956 and 1966.

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Table 1: Greek banking sector 1956-1966 (Source: Bank of Greece)

The great development of the banking sector in this decade (1956-1966) was the result of the general development of the Greek economy, which occurred in that period.

During this period, foreign banks are coming to Greece. Specifically, in these years, the following foreign banks appeared (Bank of Greece, 1978):

 1968: Bank of America (USA),  1968: Chase Manhattan Bank (USA),  1969: Bank of Nova Scotia (Canada),  1971: First National Bank of Chicago (USA),  1972: Continental Illinois Bank (USA),  1973: Banque Internationale pour l’ Afrique Occidentale (France),  1974: Grindlays Bank (England),  1974: National Westminster Bank (England),  1974: Williams and Glyn’s Bank (England),  1974: Algemene Bank Nederland (Nederland).

During the political transition period, from 1974 to 1990 (when privatizations begin), the Greek banking system continues to grow and its main feature is that it is essentially controlled by the state. After the acquisition of control of Commercial Bank Group (Emporiki Bank) in 1976, the banks directly under state control were the following (Pagoulatos, 2006):

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 National Bank of Greece,  National Bank of Investment of Industrial Development: ETEBA (Group of National Bank of Greece),  Bank of Professional Credit (Group of National Bank of Greece),  Commercial Bank (or Emporiki Bank),  Ionian and Popular Bank (Group of Commercial Bank),  Piraeus Bank (Group of Commercial Bank),  Attica Bank (Group of Commercial Bank),  Bank of Investment (Group of Commercial Bank),  Agricultural Bank of Greece,  Hellenic Bank of Industrial Development: ETBA,  Hellenic Postbank,  Consignment Deposits & Loans Fund.

The following banks were under indirect state control:

 Mortgage Bank,  General Bank (Geniki Bank),  Bank of Greece.

Finally, the three private banks of this period were the following:

 Credit Bank (today's Alpha Bank),  Bank of Labor (Ergasias Bank). It was established in 1975 and merged with Eurobank in 2000.  Bank of Crete (which operated again after a long stay in liquidation and merger with the National Bank of Greece, but never completed).

In the 1990s, efforts to join of our banking system into the united European banking area began (Melas, 2012). Changes in the institutional framework of bank operations have had an impact on the oligopolistic structure of the system, since the role of large state banks has changed, while the role of private banks has been strengthened. At the end of this decade, 17 Greek commercial banks and some foreign banks operate in Greece.

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In the same decade (1990), the cooperative credit was emerged in our country and the first cooperative banks are established (in total 16 were established throughout Greece), which carry out all the operations of the commercial banks (www.este.gr).

During this period, the following banks are privatized: Piraeus Bank, Bank of Crete, Bank of Athens, Bank of Macedonia-Thrace, Bank of Central Greece, Chios Bank, Attica Bank, Ionian & Popular Bank. At the same time, the operations of the Bank of Investment, the Arab-Hellenic Bank, Credit Lyonnais and Chase Manhattan Bank were suspended, while new private banks were established, such as: Egnatia Bank, Interbank, Aspis Bank, Doriki Bank and Euromerchant Bank (which later renamed Eurobank). We also have the entrance of foreign banks (Cyprus Popular Bank, Bank of Cyprus and the Bayerische Vereinsbank from Germany). A basic feature of this period is also acquisitions and mergers. Specifically:

 National Bank of Greece merged with its subsidiary National Mortgage Bank, in 1998, which in the meantime had absorbed the National Housing Bank.  Egnatia Bank acquired the Bank of Central Greece, in 1998.  Alpha Credit Bank acquired 51% of the Ionian & Popular Bank, in 1999.  Telesis acquired the Doriki Bank, in 1999, and in turn it was acquired in 2001 by Eurobank.

Piraeus Bank acquired:

 Chase Manhattan Bank, in 1997,  Credit Lyonnais (Grece), in 1997,  Bank of Macedonia-Thrace, in 1998,  Chios Bank, in 1999,  National Westminster Bank (Greece) in 1999.

Eurobank (former Euromerchant Bank) acquired:

 Interbank, in 1996,  Bank of Athens (former Bank of Professional Credit), in 1998,  Bank of Crete (the part of the good bank), in 1999,  Bank of Labor (Ergasias Bank), in 1999 (and renamed Eurobank-Ergasias).

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As a result of the above evolutions, at the end of the 20th century, six banking groups were essentially operating: National Bank of Greece, Alpha Bank, Commercial Bank (Emporiki Bank), Eurobank, Piraeus Bank and Agricultural Bank of Greece.

5.3 The current situation in the Greek banking sector

The main feature of the Greek banking sector in today’s era is the continuous mergers and acquisitions that have begun since the end of the 1990s.

Enterprises are involved in mergers and acquisitions in an effort to confront the new economic conditions and the changes in their competitors' strategies. The main incentives for cross-border mergers and acquisitions are mainly the speed of access to markets and the pursuit of strategic assets such as technology, patents, brand names, as well as access to and control of distribution networks. Other factors that affect it are efficiency, diversification and market power (Bitzenis and Vlachos, 2012).

As enterprises evolve into multinational entities, they deepen and broaden their international ties and generalize competitive advantages over enterprises not engaged in international activities. Acquisition of an existing enterprise is effected through its direct acquisition or the privatization of a state controlled enterprise or the acquisition of a majority shareholding. In merger of two or more enterprises, usually one is greater than the other. The main purpose in this case is to reorganize the smallest enterprise. The banking sector is a pioneer in mergers. Large banks and companies are merging to survive in times of intense competition (Bitzenis, Vlachos and Papadimitriou, 2012).

As far as the major Greek banks are concerned, since 2000 they continued to expand, especially in the countries of Southeastern Europe, by acquiring banks in these countries. In the middle of the 2000s, these acquisitions reached their highest point, especially in 2006, when Greek banks allocated 3 billion euros for their expansion, firstly in the Balkan countries, and secondly in Eastern European countries (Papadogiannis, 2014). The following table shows the countries where the five largest banks in Greece were expanding, as well as the percentages of the foreign banks that they acquired.

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Table 2: Expansion of presence of Greek Banks in South Eastern Europe (Source: Deloitte)

At the same time, however, we also have the acquisition of some Greek banks by foreign banks. In particular, the Greek banks that were acquired were as follows (Deloitte, 2006):

 General Bank (Geniki Bank): acquired by French Societe Generale, in 2004.  Nova Bank: Founded in 2000, it was acquired by the Portuguese Millennium BCP in 2005 and renamed Millennium Bank.  Commercial Bank (Emporiki Bank): acquired by French Credit Agricole, in 2006.

Finally, Geniki Bank (2012) and Millennium Bank (in 2013) were acquired by Piraeus Bank, while Emporiki Bank (in 2013) was acquired by Alpha Bank.

The euphoria of the early years of the 21st century quickly disappeared quickly, since at the beginning of the next decade (that is, the current decade) the evolutions in the Greek banking sector are negative and linked to the economic crisis in our country. Greece entered the era of Memorandum with its lenders (European Commission, European Central Bank and International Monetary Fund) in 2010, and the economic and social crisis also had a direct impact on the banks. In 2012, an effort was made to restructure Greek sovereign debt (but without result eventually), with the involvement of private sector (PSI) and the ‘haircut’ of Greek bonds, in which banks also participated. The capital adequacy of Greek banks suffered a great blow, with the result that 49 billion euros (from the total amount 130 billion euros of the new Greek loan) are committed to their recapitalization (Kakouris, 2014).

Simultaneously with the recapitalization of the banks, the Bank of Greece proceeded with the process of reorganization of the banking system, following the instructions of the European Central Bank and under the terms of the second Memorandum. For those banks

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that failed to catch up with the indicators, it was decided to withdrawn their operation license (Bank of Greece, 2014).

Thus, from 2011 to 2015, the license was withdrawn in 14 banks (of which 7 were cooperative). The Bank of Greece appointed PQH S.A. as Special Liquidator for all banks that are currently under special liquidation (Government Gazette 925B, 2016).

Shareholders in PQH S.A. are Price Waterhouse Coopers (PwC Business Solutions SA, Greece), the company of management of debt portfolio Qualco S.A. and the Swedish company Hoist Kredit Aktiebolag, which specializes in managing non-performing bank loans (PQH S.A.).

The banks that are currently under liquidation are the following (Bank of Greece):

 1995: Bank of Crete. It is the only bank in liquidation before the Greek financial crisis, due to the scandal that broke out when it was owned by George Koskotas. The new Bank of Crete (good bank) was acquired by Eurobank in 1999.  2011: Proton Bank. It was established in 2001 and was the first bank to take reorganization measures from the Bank of Greece. The audit revealed the poor quality of its loan portfolio, while half of the loans were given to companies of its main shareholder, Lavrentis Lavrentiadis, with low collateral. Thus, it was decided to establish New Proton Bank, which was absorbed in 2013 by Eurobank Ergasias, while the bad bank is in liquidation.  2011: T-Bank (former Aspis Bank). While initially (in 2011) its merger started with Hellenic Postbank, it was finally canceled, resulting in liquidation. Its deposits were transferred (following an auction organized by the Bank of Greece) to Hellenic Postbank (with which the merger had been canceled).  2012: (i) Achaiki Cooperative Bank, (ii) Cooperative Bank of Lamia, (iii) Cooperative Bank of Lesvos-Lemnos. All three cooperative banks were put under liquidation, while all their deposits, through a tender procedure by the Bank of Greece, were transferred to the National Bank of Greece.  2012: Agricultural Bank of Greece. With the "haircut" of Greek government bonds (PSI) that took place in the same year, it required 5 billion euros to recapitalize the bank but the amount was not made available by the state as its main shareholder. Thus, it was split into a bad bank that was put into liquidation and a good bank that

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was acquired by Piraeus Bank (it was the only bank concerned in the informal and confidential tender procedure followed by the Bank of Greece).  2013: Hellenic Postbank. As with the Agricultural Bank of Greece, with the PSI of the previous year, capital requirements of 3.7 billion euros were created. This amount was not covered by the state, which was its main shareholder, so it was decided to establish a transitional credit institution (New Hellenic Postbank), which was absorbed in the same year by Eurobank Ergasias, while the bad bank was put into liquidation.  2013: (i) Probank, (ii) First Business Bank (FBB). After the PSI of 2012 and the separation of the banks into "systemic" (National Bank of Greece, Piraeus Bank, Alpha Bank and Eurobank) and non-systemic (including Probank and FBB), they failed to recapitalize and thus split into bad banks, which were put into liquidation, and in good banks, which were absorbed by the National Bank of Greece.  2013: (i) Cooperative Bank of Dodecanese, (ii) Cooperative Bank of Western Macedonia, (iii) Cooperative Bank of Evia. All three cooperative banks were put into liquidation in the same year, while all their deposits were transferred to Alpha Bank.  2015: Panhellenic Bank (Panellinia Bank). It was established in 2001 and was the commercial bank of the sector of the cooperative banks, which were its main shareholders. It was not recapitalized and so it split into a bad bank that was put into liquidation and a good bank, which was absorbed by Piraeus Bank.  2015: Cooperative Bank of Peloponnese. The last bank that was put into liquidation. All its deposits were transferred to the National Bank of Greece.

After all these changes and reclassifications, with mergers and acquisitions of many banks, with the withdrawn of the licenses of the remaining banks, with the imposition on banks of the capital controls from 2015 and without we know if there will be any other changes in the near future, the situation in the Greek banking sector seems to have calmed down. The landscape has almost cleared up, and nowadays, the Greek banking system is basically based on the four systemic banks. In detail, the banks that survived after the unusual situations that occurred in our country are the following:

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Piraeus Bank: We can say that it was the winner of mergers and acquisitions within Greece, both before and during the crisis. Following the banks it acquired in the late 1990s (Chase Manhattan Bank, Credit Lyonnais Greece, Bank of Macedonia-Thrace, Chios Bank and National Westminster Greece), it also acquired ETBA Bank in 2002. The next acquisitions took place during the crisis. In 2012, it acquired the good part (good bank) of the Agricultural Bank of Greece, when it was put into liquidation. It also it acquired the General Bank (Geniki Bank) from French Societe Generale, when it left Greece. In 2013, due to the crisis that broke out in Cyprus, the three Cypriot banks had to leave Greece, according to the instructions of the European Central Bank. Piraeus Bank acquired all the operations in Greece of the branches of the three banks: the Cyprus Popular Bank CPB (which resulted from the merger of Greek Marfin-Egnatia and the Cyprus Popular Bank), the Bank of Cyprus and the Hellenic Bank. In the same year, it bought Millennium Bank, after the Portuguese bank left our country, and in 2015, it acquired the good part (good bank) of the Panellinia Bank when it was put into liquidation. That is, Piraeus Bank, in about fifteen years, acquired thirteen banks. Simultaneously with the many acquisitions within Greece, it sold ATE Bank in Romania in 2013 and its subsidiary Piraeus Bank in Egypt in 2015. It has 860 branches, of which 628 are in Greece and 232 abroad. Its deposits amounted to 41.8 billion euros, while its loans amounted to 61 billion euros before provisions and 45.7 billion euros after provisions. Thus, the loans-to-deposits ratio reduced from 122% in the previous year to 109%, while the capital adequacy ratio is 17% (Piraeus Bank, 9month 2017 results).

National Bank of Greece: In addition to the acquisitions of Probank and FBB (which were relatively small banks), as well as the transfer of deposits from four cooperative banks, it has not made any further acquisitions in recent years. Instead, in 2016 it sold its percentage in Turkish Finansbank. The buyer was Qatar National Bank and the sale amount was 2.75 billion euros (www.naftemporiki.gr). In 2017, it also completed the sale of its subsidiaries in Serbia. It has 661 branches, of which 542 are in Greece and 119 abroad. Its deposits amounted to 38.8 billion euros, while its loans amounted to 43.2 billion euros before provisions and 32.3 billion euros after provisions. Thus, the loans-to- deposits ratio is 83%, while it has a capital adequacy ratio is 16.8% (National Bank of Greece, 9month 2017 results).

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Alpha Bank: Before the crisis, it acquired the Ionian-Popular Bank (Ioniki-Laiki Bank), which was a subsidiary of Commercial Bank (Emporiki Bank). During the crisis (in 2012 in particular), Alpha Bank also acquired Emporiki Bank from Credit Agricole, after the French wanted to leave Greece. In 2014, Citibank left Greece and its retail banking was acquired by Alpha Bank. In the middle of 2013, the deposits of three cooperative banks, which were put into liquidation in this year, were transferred to Alpha Bank. Its branches are 667, of which 470 are in Greece and 197 abroad. Its deposits amounted to 33.9 billion euros, while loans to 55.7 billion euros before provisions and 43.6 billion euros after provisions (loans-to-deposits ratio is 128%). The capital adequacy ratio is 17.9% (Alpha Bank, 9month 2017 results).

Eurobank: In addition to the banks it acquired before the crisis (Interbank, Credit Lyonnais Greece, Bank of Athens, Bank of Crete, Ergasias Bank), it acquired two more banks in 2013, the bad parts of which were put into liquidations: Proton Bank, but mainly, the New Hellenic Postbank. At the same time, it left Turkey and Poland (in 2012), in 2016 it left Ukraine, and in 2017 it announced the exit from Romania. It has 706 branches, of which 398 are in Greece and 308 are abroad. The deposits amounted to 33.2 billion euros, while loans to 48.3 billion euros before provisions and 37.2 billion euros after provisions (loans-to-deposits ratio is 112%). The capital adequacy ratio is 17.4% (Eurobank, 9month 2017 results).

Apart from the above four banks, which are essentially the banking sector in Greece, there are also the following banks, with much smaller sizes:

Attica Bank: This is the only non-systemic commercial bank that has managed and survived after the all changes we had in recent years in the Greek banking system and in the economy as a whole. It is also the only listed bank on the Athens Stock Exchange, which was recapitalized without the need for the Financial Stability Fund. Its largest shareholder is the Fund of Engineers (TSMEDE), which has joined the Single Social Security Entity (EFKA) since 2017. It has 55 branches all over Greece. Its deposits amounted to 1.84 billion euros, while its loans amounted to 2.65 billion euros before provisions and 2.19 billion euros after provisions (loans-to-deposits ratio is 119%). The bank's capital adequacy ratio is 15% (Attica Bank, 9month 2017 results).

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Consignment Deposits & Loans Fund: It is an autonomous financial organization and is a legal entity of public law. Besides keeping and managing all kinds of consignments, it also performs banking operations. It grants loans to local authorities and municipal enterprises, as well as housing loans to civil servants. It receives deposits from natural persons and not-for-profit legal persons. It has four branches all over Greece (Athens, Piraeus, Thessaloniki, Patras). On 31/12/2016, deposits amounted to 5.1 billion euros and loans to 3.9 billion euros (www.tpd.gr).

Cooperative Banks (9): Initially, there were 16 Cooperative Banks, but after the seven banks were put into liquidation, the rest nine banks which remain are the follows:

 Cooperative Bank of Chania  Cooperative Bank of Drama  Cooperative Bank of Epirus  Cooperative Bank of Evros  Cooperative Bank of Karditsa  Cooperative Bank of Pieria  Cooperative Bank of Serres  Cooperative Bank of Thessaly  Pancretan Cooperative Bank

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6. Social and ethical responsibility of banks

6.1 Strategic banking management

Banks should orient their strategic management first to human. However, the orientation towards human does not mean that there should not be a technological orientation. Their harmonious combination, of course, will have a positive impact on both the bank and the customer.

Strategic management is more a management philosophy than a technical process. As a philosophy, it concerns all members of an organization and as a technique, it concerns those involved in the technical part of its process. The philosophy of strategic management should focus primarily on human and then on systems, processes and organizational charts. It not comes to solve social and ethical subjects or to rephrase what has been highlighted by other sciences and theories but it comes to emphasize that these subjects should not leave the organizations indifferent, whether they are private or public and either seek profit or not. It is needless to support, as do the Nobel laureate economist Milton Friedman, that an enterprise has only one responsibility: economic performance. It is needless, also, to support, that we must get to the opposite end, as many do, who renounce profit, because they consider it, as symbol of selfishness and oppression. Any discussion about social responsibility or ethical principles is useful and the balance should be sought somewhere in the middle. Strategic management focuses on the survival and development of organizations created by people. It also focuses on the human actions and situations that determine this effort for survival and development (Hasiotis, 1998).

As far as banks are concerned, their effective operation, according to the general economic objectives, depends to a large extent on their proper and satisfactory management. As with any other business, banks must be effectively managed to avoid serious risks to the economy. They should also achieve their aims, in order to build a strong, developing and evolving banking system that can satisfy the demands of society. With regard to the philosophy of a banking institution, it is determined by the notion of credit culture in the banking market. By notion of credit culture, we mean the only combination of policies, practices, experience, and management of the loan portfolios of the banks, which

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determine the borrowing environment. More broadly, we would say that credit culture is the system of behavior, beliefs, philosophy, mien and the expression associated with the management of the operation of bank credit. A strong credit culture penetrates the organization of the bank from top to bottom, while its practical dimension must be more experienced from its parts, instead of defined by rules and policies. Banks that incorporate the developed long-term credit culture into their management are more favored (Zopounidis, 2009).

The products and services offered by a business, and therefore a bank, should be given to the customers in such a way, that on the one hand, they are attractive to them and, on the other hand, the human side of the process is not lost. When customers accept a product and a service, it should create a value and be a special experience for them. Positive customer experiences have always been an important part of the marketing of many companies. Successful management of customer experience should be the ultimate aim. A typical example is Umpqua Bank in Portland of the USA. A visit to this bank includes much more than a loan or a deposit. Its branches are designed in such a way that they transform the banking into an enjoyable process. Customers can enjoy their coffee, watch investment news on TV, read their morning newspaper listening to music and maybe buy something. Customers feel that they are members of a club that aims at their mental satisfaction. This tactic has had positive results for the bank, since its assets of 140 million dollars in 1994, increased to over 8 billion dollars (Armstrong and Kotler, 2011).

Figure 6: Yoga classes in Umpqua Bank (Source: Economist) At the entrance of the bank they offer local hand cream and various other local products. Many of the branches also have unusual activities such as art exhibitions, yoga classes and

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group knitting. Umpqua Bank has 364 branches across Washington, Oregon, California, Nevada and Idaho and plans to add more. Most banks have aggressive sellers who push their customers and offer similar products in similar environments. Visiting them is often tedious because there are long queues and lots of papers. Umpqua Bank, on the contrary, is trying to create branches which neighborhoods will welcome them, and people will want to visit them. In each branch, in a prominent position, there is a phone directly connected to the office of Ray Davis, the bank's chairman. If he is in his office, he answers. Usually, he says, the caller just wants to know if the line is genuine. The bank prides itself that is doing everything different. Instead of sending the consumer loans offers across e-mail, Umpqua Bank's employees attached small brochures to plant pots and placed them at 1,700 entrance doors in the neighborhood they were targeting. Umpqua Bank has shown its ability to thank its customers, and its upward trend is proof that a small bank may actually be different (Economist, 2014).

From the above we see, therefore, that if there is imagination in management, the results can be surprising. It is enough, of course, that banks see the customer as a human, rather than a number of their total aim.

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6.2 Corporate Social Responsibility in the banking sector

The social commitment of the banks and their profitability must not be two mutually excluded notions but, on the contrary, they must complement each other. Their administrations should try to harmonize their aims with the aims of the societies in which they operate. They have to choose both the social purposes they will support, as well as those initiatives, which will promote both their banks, as well as these purposes. The development of the local community well-being, through selective business practices and with the succor of corporate resources, must be a target of the banks and they must be devoted to it. This is the notion of corporate social responsibility. Whole essence of corporate social responsibility is included in these selective business practices mentioned above. Activities that are applied by a bank or an enterprise in general, due to their imposition by laws and ethical rules are probably expected. Corporate social responsibility, instead, refers to the obligation that an enterprise undertakes voluntarily (Kotler and Lee, 2009).

Beginning of corporate social responsibility dates in the middle of the 1950s when the Supreme Court in the USA decided to abolish the legal constraints that prevented companies from participating for social purposes. In the next decade, most companies of the USA created their own institutions and offered donations, trying to show their social face (Smith, 1994).

In our country, the notion of corporate social responsibility emerged at the beginning of the last decade. In 2000, the Hellenic Network for CSR (www.csrhellas.net) was established, as a member of CSR Europe, and so began also in Greece the promotion of the principles of corporate social responsibility. Since 2008, the Corporate Responsibility Institute (www.cri.org.gr) has been awarding prizes to companies with exceptional performance in the application of CSR responsible practices, according to the terms that determined by the CR Index (Corporate Responsibility Index). This indicator measures the performance of enterprises in the following four areas: society, environment, market and consumers, workers. As we can see in the table below, in the last year, in the first two positions, there are companies from banking sector: Piraeus Bank and National Bank of Greece.

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Table 3: CR index 2016-2017 (Source: Corporate Responsibility Institute)

This proves that banks regard the actions of corporate social responsibility as a strategic investment. Social interventions, environmental policy, relationships with clients and with market in general, and the support of their human resources should be the main pillars of corporate social responsibility for all banks, especially in times of economic crisis (such as this which we are experiencing today), because all social sectors are negatively affected and therefore need support. Banking administrations are aware that clients do not have an indifferent attitude towards socially responsible or non-responsible enterprises.

A recent survey by the Institute of Communication (www.instofcom.gr) in 2016, shows the attitude of consumers to this subject, who either reward or punish enterprises (conscious consumerism). Specifically, in a sample of 700 citizens, 38.5% made conscious acts of rewards, while 13.5% had thought about it, but it has not done so. On the other hand, 59.8% made conscious acts of punishment, while 12.6% thought it, but did not.

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Regarding the side of the enterprises, a survey, that was carried out by ICAP Group in 2016 (www.icap.gr) on a sample of 85 Greek enterprises from various sectors, reflects their attitude towards the applied actions and practices of corporate social responsibility. While 93% of Greek enterprises consider that the corporate social responsibility is important to a large extent (39%) or to a very large extent (54%) (Figure: 7), however only 19% consider that the application of the corporate social responsibility has developed to a large extent (13%) or to a very large extent (only 6%) (Figure: 8).

Figure 7: Evaluation of CSR significance by companies (Source: ICAP Group)

Figure 8: Degree of application of CSR actions in Greece (Source: ICAP Group)

Therefore, Greek enterprises, including banks of course, still have very big margins for further development of their actions within the framework of their corporate social responsibility. Banks should focus on this further development of their actions, because public opinion in Greece has turned against them in recent years, since they are considered to a great extent, responsible for the current economic crisis and its consequential social

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impacts. Certainly, it is a fact that recent years they are trying for the application of the corporate social responsibility, but the demands of the society are justifiably increased.

On an annual basis, the banks present their reports on corporate social responsibility about of their actions in culture, environment, sport and their social contribution in general (Lidorikis, 2006).

The main areas of social action of the four largest Greek banks are described below. i) Corporate Social Responsibility of Piraeus Bank

Since 2007, Piraeus Bank has established a Corporate Responsibility Committee, whose actions are based on the following principles (www.piraeusbankgroup.com):

 Optimization its corporate governance, which is achieved through transparency, both in the operations of the bank and in the evaluation and selection of its partners and suppliers.  Alignment its aims with social progress and solidarity, through efficient service its clients, before and after selling their products, emphasizing its advisory role.  Adoption of excellent work practices, with the development of a human organization, in which employees operate collectively, thus ensuring its well-being and development.  Harmonious relationships with its social partners, returning part of the value created through strategically designed actions.  Promotion of culture through the creation and maintenance of the thematic technological museums of the Piraeus Group Cultural Foundation.  Protection of environment with support of green entrepreneurship and with development of strategies to improve the environmental performance from operation of the bank.

ii) Corporate Social Responsibility of the National Bank of Greece

The National Bank of Greece, since 1841, when was established, until today, proves its interest and sensitivity to human values, social development, support of entrepreneurship, the rescue and preservation of our culture, the contribution to education and the arts, and

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protection of the environment. The fields of the National Bank's Corporate Social Action Program (so-called ‘Responsibility’) are the following (www.nbg.gr):

 Human: It supports social solidarity programs and strengthens sensitive social groups. It offers sponsorships and supports the scientific work, helps in the task of the bodies which take care of the protection of environment and supports sports federations and athletes.  Culture: It supports activities related to music, visual arts and performing arts, and offers sponsorships for the preservation of monuments and archaeological excavations. Also, the Art Collection of the bank helps many cultural institutions and participates in organizations of exhibitions.  Environment: It strengthens the environmental consciousness of its staff while with the Environmental Management Program it saves natural resources and applies environmental criteria to the selection of its supplies.

iii) Corporate Social Responsibility of Alpha Bank

Alpha Bank, in the context of its social contribution, takes care of the working environment of its human resources, the protection of nature and the social and cultural life of our country. Its Corporate Responsibility Policy is based on the following fields (www.alpha.gr):

 Organization and operation of the Bank: They are determined by the principles of Corporate Governance, such as integrity, honesty, impartiality, independence, confidentiality and discretion.  Clients: The main concern of the Bank is the continuous improvement of the products it offers to its clients and its primary objective is the reliability, consistency and speed at which it serves them.  Environment: It is characterized by responsibility about the environmental protection and natural resource conservation.  Human resources: It respects the diversity of its employees, provides fair wages under contract, recognizes the right to trade union activity, concerns about their continuous training and education and ensures their health in the workplace.

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 Society: It supports society and citizens by giving priority to the fields of culture, education, health and environmental protection.

iv) Corporate Social Responsibility of Eurobank

The Corporate Social Responsibility of Eurobank gives priority to the following areas (www.eurobank.gr):

 Innovation and entrepreneurship: The extroversion of Greek businesses, innovation and excellence are supported.  Education: Students from all over the country who win first places in the Panhellenic Examinations are rewarded with 800 euros .  Social Solidarity: It supports the program of Archdiocese of Athens since 2014, with which is provided help to students with a food problem.  Greek Sport: It offers substantial sponsorship support to athletes and teams (eg in all National Basketball Teams since 2001).  Culture: It subsidizes performances at the Athens Concert Hall and the National Opera.  Savings: The value of saving has been promoted for 100 years throughout Greece through the Hellenic Postbank.  Environment and Sustainable Development: The green economy is becoming a reality in the daily work and practices of the Bank.  International Collaborations: It cooperates with important bodies, both Greek and foreign, which are active in environmental protection, sustainable development and corporate social responsibility.

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6.3 New technologies in banking (e-banking)

The use of e-banking due to capital controls has increased in Greece in recent years, but we still cannot say that it is approaching the levels of other countries. New banking technologies, apart from the fact that they greatly simplify banking transactions, make the client feel more active, as he has control over the process of the transaction with his bank. The use of e-banking and plastic money (cards) has great margin for further development in our country and is certainly a place where Greek banks should focus. The future of the Greek banking sector can only be inextricably linked to new technologies and the internet. Banks should combine their human orientation with their technological orientation. Ethics and the Internet should not be considered as two contradictory notions but, on the contrary, strategic management of the banks should seek to their harmonious coexistence. Any evolution of e-banking in our country in recent years, even forced because of the imposition of capital controls, should not be left unnoticed, but should be realized the necessary actions needed to its further develop.

The future of banks seems to be released more and more out of queues in their branches, since the current lifestyle at its fast pace does not allow the client to wait a long time for a simple transaction. Banks started their battle to acquire modern and different ways of contacting clients by using ATMs (Automated Teller Machines). Other ways were followed, such as EFT/POS (Electronic Funds Transfer at Points of Sales), internet banking, mobile banking, and phone banking. With new technology in banks, their employees are now advisers and helpers of clients, and are not busy with simple transactions (Sinanioti-Mavroudi and Farsarotas, 2005). The main e-banking channels are examined below:

i) Internet banking

The first bank that offered its services to its clients through internet was Wells Fargo Bank, in 1990 in the USA. In our country, the bank that first used the internet in banking transactions was the Egnatia Bank, in 1997. When clients of the bank carry out their transactions through internet, they don't have to go to a branch. With internet banking, the various transactions are handled in real time. Banks separate internet banking according to

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the category to which clients belong. Thus, there are private internet banking and business internet banking (Aggelis, 2005).

The most common banking transactions (both with money and without money) that clients can make through internet banking are as follows (Sinanioti-Mavroudi and Farsarotas, 2005):

 Payments of various bills (telephone, electricity, water, etc.), payments to various companies (eg insurance companies), debts and contributions to the state, credit cards and loans.  Money transfers to their accounts or accounts of other clients, either to the bank in which they are clients, or to other banks.  Managing their investment products (such as time deposits, stocks, bonds, mutual funds).  Orders for checkbooks and tracking the progress of their orders.  Requests for loans and cards.  Requests for standing orders, so that specific payments are automatically made.  Updates on the movements and balances of all the products they have at the bank.  Changes in their personal identification numbers and their personal information.

ii) Automated Teller Machines (ATMs)

The first Automated Teller Machine (ATM) was operated in 1967 by Barclays Bank in London and was the invention of John Shepherd-Barron from Scotland (Perdikaris, 2017). In Greece, the first bank that installed ATMs was 1983 Credit Bank, today's Alpha Bank (www.alpha.gr).

Transactions with ATMs do not require an employee of the bank to intervene because the client performs the desired transactions by following the instructions given. ATMs in the current era are the first option for withdrawing money from clients, compared to cash desk of the branches (Singh, 2014).

By using of the ATMs by clients, employees of the bank are exempt from simple day-to- day transactions. The services offered by ATMs are many, and they are constantly increasing due to competition between banks. Clients perform the desired transactions

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using their special card (cash card) and entering their personal identification number (PIN). They operate on a 24-hour basis, all days of the week, both inside and outside bank branches, as well as in areas with many people (such as shopping streets or shopping centers). Significant is also their operation for those areas where bank branches do not exist and clients are serviced for their withdrawals and deposits exclusively from ATMs. The main transactions made through ATMs are the following (Mirtidis, 2008):

 Withdrawals and deposits with simultaneous update (or even printing) of account balances.  Money transfers between accounts linked to customer cards.  Payments of various accounts, debts and contributions to the State, credit cards and loans.  Updates and prints of the latest moves.  Changes to card PINs.

iii) EFT/POS (Electronic Funds Transfer at Points of Sales)

EFT/POS are terminal machines that exist in shops and enterprises that sell products or provide services. Customers, in order to make a purchase, must use their cards (credit, debit or prepaid) in the EFT/POS terminal machine. This is the use of so-called ‘plastic money’, which began in the USA, in 1950, when Diners Club and American Express issued their first debit cards, and Diners Club issued its first credit card next year. In our country the first bank that issued a card was the National Bank of Greece, in 1971 (Mirtidis, 2008).

The use of ‘plastic money through EFT/POS terminal machines has the basic advantage that the cardholder doesn't need to transfer money with him, and thus eliminates the risk of their possible loss or even theft. Of course, the avoidance of the above two risks, due to the use of EFT/POS terminal machines, also applies to the entrepreneurs who have them. The main disadvantage of the use of "plastic money" is the fact that the customers, due to the convenience of cards to transactions, often make purchases that do not responsive to their economic capabilities, making them insolvent to their bank (Sinanioti-Mavroudi and Farsarotas, 2005).

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iv) Mobile banking

Another evolving field of electronic banking is mobile banking. By using their mobile phones, the clients of the banks have the possibility to enjoy all the e-banking services provided also for internet banking, since they can access the internet (Sinanioti-Mavroudi and Farsarotas, 2005).

The most important advantage of mobile phone, and therefore of mobile banking, is its portability. Clients are almost always close to their mobile phone, which is used in addition to a means of telecommunication and as a means of accessing electronic information (Sirmakezis, 2003).

v) Phone banking

The telephone transaction of the client with his bank can be done wherever he is (either in his country or abroad). The client connects with the bank very easily, as all he has to do is follow the instructions of the employee who serves him or his answering machine. The services provided by this e-banking channel are the same as those of internet banking and mobile banking (Sinanioti-Mavroudi and Farsarotas, 2005).

All banks have call centers offering phone banking services, thus upgrading their customer service. There may be surveys that show that as internet banking is on the rise, both phone banking reduced, but for many years it will still be an alternative banking channel. This is because, on the one hand, internet banking requires special equipment and, on the other hand, by phone banking the communication with the employee is immediate (Mirtidis, 2008).

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6.4 Human and Ethical Banks

Because of the recent global economic crisis, in which financial institutions have played a leading role, should be reviewed their way of the function and to promote, more than ever, the adoption of ethical and human values in the banking sector. A bank, which will have as its main feature ethics and will focused on human, should not seek the speculation, but solidarity and social standards. Banks must put the economy at the service of all citizens and aim at sustainable development without social exclusions. They must support innovative social and environmental projects and, in general, to operate as an economic lever for a sustainable, active and supportive society (www.febea.org).

Ethical banks began to appear in the 1960s and 1970s as a result of the social movements of these decades. At that time the formation of the view of a reasonable return on savings began and provided that it could add something to social development. Thus, the first alternative banks, which offered cheaper banking services, emerged, and had returns equal to or higher than those of traditional banks. The huge profits of the financial institutions, combined with the violation of moral rules, challenge the community, especially in times of economic crisis. The classic banking system often favors activities and enterprises that are catastrophic for the society and environment. On the contrary, ethical banks fund disadvantaged people or long-term unemployed, and with their micro-credits to impoverished citizens of Third World help them to open up their own business and have a decent life (Daroussos).

There are examples of such banks, which have put people above speculation, and by the way of their operation have shown that ethical banks can be an alternative solution (and not complementary) to the classic banking system. The first and most typical example is Grameen Bank, or the Bank for the Poor. It was established in 1983 by Muhammad Yunus (who was university professor), in Bangladesh, one of the poorest countries in the world. The main objective of the bank was to provide micro-loans to poor people with very favorable repayment terms. This gave them the opportunity to escape the unfavorable economic situation they were living in. The classic banking system was reluctant to lend people who were very poor, and those who lended, banks debited them at high interest rates. However, Yunus proved from his revolutionary microcredit system that credit and lending is the right of all people. And, in recent years, he may have faced problems with

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the government of his country for political reasons, or some may argue that both the idea of micro-credit and the fame of Grameen Bank have lost some of their shine, but most agree that he has created a legacy of real social change. He earned international recognition about the poverty reduction techniques that were embraced by many western countries, and in 2000 he helped Clinton to introduce microcredit programs in some of the poorest communities in Arkansas (BBC, 2011).

In 2006, Muhammad Yunus and Grameen Bank were awarded the Nobel Peace Prize jointly for their efforts to create economic and social development from below. In the year that they received the Nobel Peace Prize, more than seven million borrowers were funded with long-term microcredit and favorable terms. The average borrowed amount was 100 dollars, while the percentage of repayment was very high. Over 95% of the loans were granted to women or groups of women. Experience shown this system had the result the best safety for the bank and the biggest beneficial effect for the families of borrowers (Nobel Foundation, 2006).

Figure 9: Muhammad Yunus and Grameen Bank: Nobel Peace Prize, 2006 (Sourse: Nobel Foundation) With a subsidy from Yunus, the Grameen Foundation was established in 1997, which aims to access microfinance for millions of poor worldwide. The ‘Bankers without Borders’ program began in 2008 with just 100 volunteers and provides help and support to organizations that fight global poverty. Today, more than 19,700 people (students, academics, entrepreneurs) volunteer their time, skills and know-how to such organizations (www.bankerswithoutborders.com).

But some of the biggest supporters of micro-lending are disappointed because of turn that has taken the measure. Many large banks are attracted from the prospect of big profits

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from micro-loans and ended up dominating the sector by charging interest rates to borrowers 100% or more. “We have created the micro-loans to fight the loan sharks and not to encourage new loan sharks. Micro-loans should be seen as an opportunity to overcome poverty through entrepreneurship rather than as a method of enriching the backs of the poor”, Yunus said at a meeting of financial officials at the UN. The main controversy is whether micro-loans really reduce poverty, as their supporters claim. The conclusion drawn by some researchers was that all poor people can’t be entrepreneurs and that the micro-loans help in extreme conditions of poverty. “The conclusion is that micro- lending failed to save the world. It is not the only transformation tool, as its supporters claim, but it has benefits”, said Dean S. Karlan, professor of economics at Yale University (MacFarquhar, 2010).

There are many ethical banks in Europe, which established the European Federation of Ethics and Alternative Banks (FEBEA) since 2001 in Brussels. It consists of 27 members, coming from 15 different European countries and operating according to the criteria of the Charter of the Federation. These criteria are gathered in the following five pillars (www.febea.org):

 Money at the service of the common good: The funds raised, are reallocated to social, environmental and cultural projects. It is promoted social inclusion, sustainable development and social entrepreneurship.  The money of citizens: Ethical funding is characterized by transparent. It comes from the real economy and returns to it. Funds are raised by the citizens, while it denies money from illegal activities, polluting industries, weapons industries and criminal groups.  For a social benefit: Ethical financial credit seeks the simultaneous achievement of the social, environmental and economic added value. By promotion of the social inclusion and employment, it supports the most vulnerable parts of the population.  Management of ethical money: Ethical banks deny both speculation through short-term financial transactions and the investment in countries and enterprises with a different vision for society.  Management of Ethic Banks: Ethical bank is not exclusively aims to profit, although a fair profit is needed to ensure the viability of the bank. Thus, the profits of ethical banks are reinvested in the promotion of their social aims, and capital

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remuneration is limited. Transparency, autonomy, cooperative management and management of ethical wages are basic features of ethical funding.

The following table shows the basic numbers of FEBEA (note: 9.8 billion euros in Triple Bottom Line assets, refers to: people, planet, prosperity).

Table 4: Numbers of FEBEA (Sourse: FEBEA)

Apart from the European Federation, there is also the Global Alliance for Banking on Values (GABV), which is an independent network of banks operating that according to the principles of ethical funding. It was established in 2009 and has 46 members (www.gabv.org).

One of the most well-known ethical banks of Europe is Banca Popolare Etica. It was the first ethical bank which established in Italy. The effort began in 1994 in the form of a cooperative and the participation of many volunteers and organizations, while in 1999 it received the license of banking operation from the Bank of Italy. Its first branch opened in Padua and now has 15 branches in Italy, while it opened a branch office in Bilbao of Spain, in 2015. In the years of the crisis, it developed even more, since, in contrast with the classic banks, its loans increased by 24%, both in 2010 and 2011. Its Statute, in addition to its overall compliance with the form that the relevant legislation provides, presents some peculiarities that characterize the special nature of the Bank since its establishment. The forceful and wide participation of the stockholders of the Bank in its share capital, as well as the democratic processes in decision-making, have helped to develop a specific case of organizational structure. The credit rating for those wishing to finance is done on social and environmental criteria (www.bancaetica.it).

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Another major ethical bank is Triodos Bank, which was established in the Netherlands, in 1980, and later opened branches in Belgium (1993), United Kingdom (1995), Spain (2004), Germany (2009) and France (2013). It was a founding member of the GABV, in 2009. The basic principle of the Bank is that everyone must have equal rights, as well as freedom for their personal and economic development, taking, at the same time, the consequences of their actions on society and on the planet. The Bank helps individuals, enterprises and organizations to achieve this balance (www.triodos.com).

Debates on the creation of an ethical bank in Greece began in 2009, with contacts and speeches by executives of the Italian Banca Popolare Etica, in Athens, since the Italian model seemed to be the most suitable for Greece. The Italian bank argued it was not interested in opening a branch in our country, but it was willing to encourage the establishment of a new ethical bank. At the same time, the European Federation of Ethical and Alternative Banks, was looking for the relevant body in Greece. The estimate of the specialists was that there should be an orientation, rather, based on the model of cooperative banks. A first example in our country, which was successful, was the Cooperative Bank of Epirus in 2003, which provided micro-credits to women and various categories of excluded clients (Fotiadi, 2009).

Finally, the first (and the only one to date) bank in Greece, which was accepted by the European Federation of Ethical and Alternative Banks, was the Cooperative Bank of Karditsa, in 2015. Thus, after evaluation, it was certified as the first ethical bank in Greece (www.efsyn.gr).

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7. Case Study (Cooperative Bank of Karditsa)

7.1 Objectives of the Case Study

This Case Study aims to present information about a cooperative bank that managed to grow during the crisis. This bank is the Cooperative Bank of Karditsa, for which we will try to highlight its survival and success factors and on the other hand to emphasize the importance of cooperative banks for the banking system and the economy in general. Numerical and historical data will be presented to understand the environment in which a cooperative bank is developing, as well as the actions it should take to create a competitive advantage. It is very important to understand the great role of micro-credits in the development of the economy in local societies, as well as the proper way in which these micro-credits should be granted.

7.2 Description and history of the Cooperative Bank of Karditsa

The proposal for the establishment of the Cooperative Bank of Karditsa was tabled at the initiative of the Commercial and Industrial Chamber of Karditsa, in 1994. Immediately this proposal was embraced by the local community, although the Prefecture of Karditsa is mainly based on the primary agricultural sector, while it remains behind, on the secondary and on the tertiary sector. Thus, the founding assembly of the Credit Cooperative was held on 28 March 1994 and the first Management Board was presented. At the beginning of 1996, the Credit Cooperative opened a branch, and until April 1998 it operated in this form. At that time, it started operating as a bank after having ensured all the conditions set by the Bank of Greece (Boukis, 2013: Presentation at the 2nd Conference on Social Economy and Social-Cooperative Enterprises).

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The response of the local community was touching, so the Prefecture of Karditsa, which had a low growth rate, acquired a very important development tool. So, this tool enabled its members to have their own local bank, which has since been trying to provide solutions to the needs of citizens and the local community (www.este.gr).

The cost of becoming a member of the Bank is just 85 euros and has the right to vote and stand as a candidate (Hatzidimitriou, 2017: Interview of Mr. Tournavitis to the Reporter.gr).

Its members are constantly growing, since in 1999 it had 2,022 members, while in 2016 it reached 7,554 members. Thus, we see that the local community supports the Bank in the years of the crisis, since its members grew by 83.84% in these years (from 4.109 to 7.554). The following chart shows us the increase of the members from 2010 to 2016.

Figure 10: Number of members 2010-2016 (Source: Cooperative Bank of Karditsa)

The shareholders of the Bank are not big investors, but small shareholders who constitute the local community. It is a multi-shareholder cooperative bank and no shareholder holds more than 3.5% of the shares (Boukis, 2015).

Since the year that it was founded until 2009, it had only one branch, which is also its central branch, in the town of Karditsa. However, along with the crisis, three other branches opened (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

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Specifically:

 In 2010 it opened a branch in the village of Palamas.  In 2012 it opened a branch in the village of Sofades.  In 2013 it opened a branch in the village of Mouzaki.

The main elements that characterize the philosophy and vision of the Bank are as follows:

 The philosophy of returning profits, the strong framework of ethical principles and its social face.  Its vision is to establish itself as a bank of the social economy, which will be an open and solidarity bank to all, demonstrating its social sensitivity.  Its forces are focused on the development of Karditsa and the needs of its members, while according to its Statute, its main purpose is to serve and promote the economic, social and cultural pursuits of its members.  The suggestions of its members are taken seriously, which enables the Bank to improved and therefore benefit its members.  Its fundamental objective is to serve the small and medium-sized entrepreneur, since the bank was created by the need of the local community to manage the wealth it produces.  Its relationship with its clients is based more on mutual understanding than on profit.

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7.3 Products and services

The clients of Cooperative Bank of Karditsa can be served by both its four branches and by e-banking (www.bankofkarditsa.gr). It is a characteristic example of a bank that combines social and solidarity economy with modern technology. Its products and services include almost the entire range of banking products and services.

i) Deposits: The general characteristics of deposits are:

 Interest is calculated from the first euro of deposits.  Interest is paid every six months.  There are no additional costs or restrictions on the moves.  There is no minimum deposit limit.  A transaction and purchase card is issued free of charge.

All deposits of the Bank, like the deposits of the commercial banks, are guaranteed by the Deposit and Investment Guarantee Fund.

Types of deposits are included:

 Savings deposits.  Sight deposits.  Term deposits.  Payroll, pensions and farm payments accounts.

During the crisis, its deposits did not decrease, but, instead, increased significantly. In 2015, there was an outflow of deposits, that was due to unprecedented facts (non- agreement with lenders, referendum, capital controls), which concerned the entire banking sector of our country. However, this outflow was stopped, and in 2016 there was an increase of 4 million euros (5.8%), reaching 74.5 million euros. The return of deposits, despite the continuation of capital controls, proves the trust of its clients over time and the

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credibility of the Bank. The chart below shows the movement of deposits from 2011 to 2016.

Figure 11: Total deposits 2011-2016 (Source: Cooperative Bank of Karditsa)

We see that despite the decline in deposits in 2015, their total increase from 2011 to 2016 is 55.78%, as deposits were increased from 47.8 million euros to 74.5 million euros.

ii) Granting of loans: The Bank offers loan products of all categories, which are modern and competitive and satisfy the needs of enterprises and households. It also participates in the ETEAN (Hellenic Fund for Entrepreneurship and Development) programs, aiming to support medium, small and micro-enterprises in innovative, dynamic and hopeful economic activities. Since May 2016, it has signed a guarantee agreement with the European Investment Fund, thus granting access to micro-finance, specifically to vulnerable groups (Tournavitis, 2016: Presentation at the Scientific Meeting on New Business Opportunities with Guide to Micro-credits).

Types of loans are included:

 Working capital.  Business equipment loans.  Investment loans.  Co-financed loans.  Contractual Agriculture.  Housing loans.

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 Car purchase loans.  Consumer loans.  Personal loans.  Letters of Guarantee.

Despite the unfavorable economic environment, the Cooperative Bank of Karditsa continued to support enterprises and households and to grant loans. The chart below shows the movement of loans from 2010 to 2016 and their upward trend during the crisis.

Figure 12: Total Loans 2011-2016 (Source: Cooperative Bank of Karditsa)

We see that there was a steady increase in granting of loans during the crisis, from 38.11 million euros in 2010 to 63.66 million euros in 2016. There was an increase of 67.04%. In particular, in small and medium-sized enterprises, which are the main clientele of the Bank, it managed to acquire a market share of almost 25% in the Prefecture of Karditsa in 2016. Thus, we can say that with regard to the function of entrepreneurship in the region, the Cooperative Bank of Karditsa has a “systemic” bank role.

iii) Insurance: The Bank, in cooperation with Cooperative Insurance S.A., has expanded its activity to the insurance transactions to cover all possible insurance risks. The insurance products it provides are the following:

 Insurance of cars, accidents, life and health.  Insurance of home, industrial and professional buildings.  Insurance of fire, theft and earthquake.

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 Insurance of transport, civil liability, public and private works.  Insurance of electronic equipment.

iv) Debit cards: Maestro and Visa Electron cards were created for the clients of Cooperative Bank of Karditsa. Through the ATMs network of the Association of Cooperative Banks of Greece and Attica Bank (with which the cooperative banks cooperate) and through the ATMs of the DIAS Interbank System (of any bank), clients can:

 Cash withdrawals from saving accounts or sight accounts.  Transfer money between their accounts.  Request and print a copy of their accounts statements.  View the balances of their saving accounts or sight accounts.  The most important privilege, however, of the debit card is that its holder can use it to make purchases in shops with direct debit of its deposit account, without the use of cash.

By using debit cards, the clients of the Bank save time, easily perform their transactions, reduce transaction costs, while the transactions are made in real time 24 hours a day, 365 days a year.

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v) POS terminals: The Cooperative Bank of Karditsa is close to all enterprises and freelancers who wish to improve the level of customer service. In order to acquire the POS terminal, what they need to do is:

 Refer to one of the four branches of the Bank.  Submit the relevant request for the purchase of the POS terminal to the competent employee of the branch.  Sign the relevant contract.  Receive the POS terminal.

Terminal POS devices can be either wired or wireless and they operate through the joint network of Attica Bank and the Association of Cooperative Banks of Greece.

vi) E-banking: Clients can make use of the developed electronic banking service of the Cooperative Bank of Karditsa, at any time, as if they were on the branch counter. E- banking offers to clients the following possibilities:

 Management of their accounts.  Banking transactions by safety.  Payment of bills.  Management of their payroll (for enterprises).

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vii) SMS alert: The Cooperative Bank of Karditsa, in the context of the continuous expansion of its services to its clients, has installed a system of banking information through mobile phone (Short Message Service). This is a strategic decision based on the penetration of mobile telephony and the familiarization of its clients with this technology.

By subscribing to the SMS alert service, the clients of the Bank can instantly be informed about the movements and balances of their accounts, about the payments of their bills and about the appearance of their checks for payment.

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7.4 Data on the cooperative banking sector

Cooperative banking emerged in Greece two decades ago. Based on the relevant legislation and the institutional framework, cooperative banks are Urban and Credit Cooperatives. After accumulating the requisite capital and fulfilling the necessary conditions, they are authorized by the Bank of Greece and can carry out all the operations of commercial banks. Those Credit Cooperatives which are licensed to act as a bank don't change their legal personality and are allowed to use the term “Cooperative Bank” in their name. Following the approval of the Bank of Greece, they may also have transactions with non-member clients, provided that such transactions don't exceed 50% of the bank's loans or deposits. The aforementioned restriction is not subject to transactions of any kind when a member of the bank is involved, as well as secondary intermediary banking operations.

Nowadays, nine Cooperative Banks operate, while five Credit Cooperatives operate, which, in addition to their efforts to transform themselves into Cooperative Banks, are active in granting loans and other financial facilities to their members. Cooperative Banks and Credit Cooperatives have established the Association of Cooperative Banks of Greece (ACBG). Cooperative Banks play an important role at the local level, as they intervene to complement and improve of the banking system of our country. Thus, a new type of bank with a customer-driven approach was established, which supports and is supported by the local productive forces and, thus, the local development is strengthened. Cooperative Banks are primarily targeted at Small and Medium Enterprises and natural persons, offering competitive products adapted to conditions of local communities. The characteristics of their operation have established the Cooperative Banks as reliable banks, friendly, flexible and with a social face. Members of Cooperative Banks are treated on the basis of trust and with the prospect of long-term cooperation. These elements contribute to the continuous upgrading of the products and services provided. The decentralized

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structure of Cooperative Banks strengthens the personal relationship between the client and the Bank. It also increases effectiveness, and in combination with their small operating costs, their modern computerized systems, their positive financial results and the benefits they achieve for their members (dividend, portion surplus, benefits from transactions), gain the confidence of the local communities and thus create conditions for dynamic development and perspective (www.este.gr).

The nine Cooperative Banks operating in Greece today are the following: 1) Cooperative Bank of Chania

2) Cooperative Bank of Drama (*) 3) Cooperative Bank of Epirus

4) Cooperative Bank of Evros (*) 5) Cooperative Bank of Karditsa 6) Cooperative Bank of Pieria 7) Cooperative Bank of Serres 8) Cooperative Bank of Thessaly 9) Pancretan Cooperative Bank (*Note: As the merger of the Cooperative Bank of Drama and the Cooperative Bank of Evros is in progress, with absorption of the second from the first, will most probably remain eight Cooperative Banks, in a few months).

After the closure of the operation of the Panhellenic Bank (Panellinia Bank), which was the commercial bank of the cooperative banking sector, in 2015, a major gap was created in respect the services it was providing to cooperative banks. Thus, in 2016, cooperative banks began a major project of strategic partnership with Attica Bank to fill this gap. Through the Attica Bank network, clients of cooperative banks are provided with upgraded electronic services for the use of ATMs and POS terminals.

The following tables present the basic financial data of both the Cooperative Bank of Karditsa and the other eight cooperative banks. The data refer to the years 2010 to 2016. That is, they refer to the period of the Memoranda and economic crisis.

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Table 5: Financial data of Cooperative Banks. Source: ESTE (ACBG)

At first glance, we could say that cooperative banks, based on their size, are separated into three levels. Undoubtedly, at the first level there is only the Pancretan Cooperative Bank, since its size is such that it makes it stand out and, by far, from the other cooperative banks. It should be noted that it has 54 branches in Greece (47 in Crete of which 31 in , 4 in Athens, 2 in Thessaloniki and 1 in Milos). At the second level there are the Cooperative Bank of Chania, the Cooperative Bank of Epirus and the Cooperative Bank of Thessaly. Their numerical data are clearly smaller than the Pancretan Cooperative Bank,

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but they are clearly larger than numerical data of the other five cooperative banks. Thus, we would say that on the third level there are the other five banks (Cooperative Banks of Drama, of Evros, of Karditsa, of Pieria and Serres).

The above analysis applies to the absolute sizes of the cooperative banks. If, however, we examine the percentage changes of these banks in the years 2010 to 2016 at a second glance, then we see the difference of growth rate of the Cooperative Bank of Karditsa in relation to the other banks. Especially in deposits, the percentage change is impressive, since while the other eight banks have a negative change (from -3.07% to -36.92%), the Cooperative Bank of Karditsa has an increase of 55.62%. Also, the percentage change in granting of loans is 56.45%, followed by Cooperative Bank of Epirus with 34.38%. A main characteristic of Cooperative Bank of Karditsa was that during these years its deposits were much higher than its loans. Indeed, in 2014, a year before massive withdrawals and capital controls, which created a huge problem for all banks (commercial and cooperative), the Cooperative Bank of Karditsa had deposits of 87,55 million euros and loans of 61,69 million euros. Thus, despite the massive withdrawals made in 2015, the Bank continued to have more deposits than loans over the past two years. While the Cooperative Bank of Epirus and the Cooperative Bank of Thessaly, which in previous years had marginally more deposits in relation to their loans, from 2015 (due to massive withdrawals) onwards, they have the opposite picture, as their loans are more than deposits. All other cooperative banks, almost all these years, had more loans than deposits. These items are shown in the table below.

Table 6: Changes in deposits and loans between 2010-2016. Source: ESTE (ACBG)

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Finally, regarding the capital adequacy ratio of cooperative banks for 2016, we can see that and in this field, the Cooperative Bank of Karditsa, is ranked first with an index of 17,93%, while the nearest bank is the Cooperative Bank of Chania with 12,60%. At this point, it should be noted that the minimum limit set for Greek banks by the European Union is 8%, which will gradually increase to 10,50% by 2019.

Table 7: Capital adequacy ratio 2016. Source: ESTE (ACBG)

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7.5 Competitive environment

The Prefecture of Karditsa is a predominantly rural area. Thus, the strong presence of the former Agricultural Bank of Greece was expected. In 2012, Piraeus Bank acquired its good part (“good bank”) and so today is the bank with most branches in the Prefecture. Therefore, it is the main competitor of the Cooperative Bank of Karditsa from the “systemic” commercial banks. Piraeus Bank has 7 branches in the Prefecture, out of a total of 20 that all banks have. Specifically, (www.piraeusbank.gr):

 Karditsa (2 branches)  Mouzaki  Palamas  Proastio (*)  Sofades  Leontari of Sofades (*)

(*Note: In Proastio and Leontari of Sofades, the branches operate in the form of a mobile workshop. That is, they open a few days a week and perform the basic banking transactions).

Another bank which also has a strong presence in the Prefecture of Karditsa is the National Bank of Greece with 5 branches. Specifically, (www.nbg.gr):

 Karditsa (2 branches)  Mouzaki  Palamas  Sofades

Of the other two large “systemic” banks, Eurobank (www.eurobank.gr) has two branches, while Alpha Bank (www.alpha.gr) has one branch (both banks in the town of Karditsa).

Lastly, special mention should be made to the Cooperative Bank of Thessaly, which has one branch in the town of Karditsa (www.bankofthessaly.gr). The special mention is made because it is a cooperative bank and even from the Region of Thessaly, in which also includes the Prefecture of Karditsa. Its head office is in the town of Trikala, while it has presence in all four Prefectures of Thessaly, with 10 branches as a whole (Prefecture of

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Trikala: 5, Larissa: 2, Volos: 2, Karditsa: 1). It could become a major competitor of the Cooperative Bank of Karditsa in the future due to its cooperative form.

The following map shows the points of the Prefecture of Karditsa, where there are branches of banks (town and villages).

Figure 13: Bank branches in the Prefecture of Karditsa

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7.6 Organization and Management

The Cooperative Bank of Karditsa is a multi-stockholder bank with nearly 7,500 members and with its upper body the General Assembly. Below the General Assembly is the Management Board, which consists of 9 members. Specifically (www.bankofkarditsa.gr):

 Chairman of the Board - Legal Representative  Vice Chairman A  Vice Chairman B  Treasurer  Secretary  Deputy Treasurer  Deputy Secretary  Member - Director General  Member - Director General

The main feature of the Management Board is that it meets frequently, once a week every Monday. At this point, it should be noted (and perhaps it is world's first) that the decisions that have been taken by the Management Board of the Bank during all these years of operation have been taken unanimously and not by majority. All the issues that occupied the Bank were resolved through dialogue and discussion and resulted in unanimous decisions. This fact shows the way the Bank operates (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

With the elections of 2015 for the new Management Board, the Bank entered a new era with a new organizational structure and function. According to the latest law defining the framework of corporate governance, two members are elected to the Management Board, who are full-time and essentially direct the activities of the Bank. It is the first cooperative bank that adapt to the new circumstances and now operates with the new regime, which gives it the opportunity, with a strong administrative structure, to face the challenges that arise in the new environment of the banking system. The two new members are Directors General. One Director General is responsible for the Bank's operation and development and for the administration of arrears loans, while the other Director General is responsible for the operation of the Bank's Administrative Services and for its Financing (Mitra, 2015: Interview of Mr. Boukis, Mr. Fillos and Mr. Tournavitis on ERT).

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Thus, the Bank's Management consists of:  Directors General (2)  Finance and Accounting Services  IT Service  Risk Management Unit  Credit's Audit Unit  Legal Committee  Arrears and Temporary Delays  Bancassurance  Internal Auditor

At the Central Branch of Karditsa there is the Director, the two superiors (one for Loans and one for Deposits) and the respective executives. Finally, in the other three branches there is one responsible at each branch, with the respective executives (www.bankofkarditsa.gr).

In total, the Cooperative Bank of Karditsa has 36 employees. Below is the organizational chart (Boukis, 2015).

Figure 14: Organization chart of the Cooperative Bank of Karditsa

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7.7 Strategy of the Bank

The fundamental difference of the Cooperative Bank of Karditsa, from which its strategy is defined, in relation to “systemic” banks, is that it was created by the need of the local community to manage the wealth it produces. As the Bank was created by society itself, it has the advantage of knowing the local factors, entrepreneurs, traders, and thus the capital available to the local market and economy has the greatest benefit (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

It strengthens local actions, which are not on the radar of other banks, the particular personal relationship and knowledge of the client, the speed of response to customer requests and the open structure and accessibility of the Bank. Its purpose is to improve the services provided with a particular emphasis on services of electronic banking and the creation of new products and flexible programs (Mitra, 2015: Interview of Mr. Boukis, Mr. Fillos and Mr. Tournavitis on ERT).

The attitude of the Cooperative Bank of Karditsa towards the borrowers, which differentiates it from the other banks, is characteristic in the case of “red loans”. It sees people behind the numbers and can understand the reasons for not responding their financial obligations and give a more immediate solution. The important fact is that there is sincerity with the client. But the most importantly is that before the “red loans” bomb exploded, the Bank had foreseen, in order that the situation to be manageable. It also contributed, that there is contact with the local community and deeper knowledge of it. The process of granting the loans was done after the assessment of several factors (Papantoniou, 2016: Interview of Mr. Boukis and Mr. Tournavitis to the newspaper “Avgi”).

It had consciously chosen not to expand into occasional and speculative sectors, granting vacation loans and credit cards (which, ex-post, were paid dearly by other banks). The fundamental objective is the dedication to the service of the small and medium-sized entrepreneur. The portfolio of the Bank is very small in the housing credit and insignificant in consumer credit. With this strategy, it managed to more than double its market share and today it has almost 7,500 members and 20,000 clients (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

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It strives to have an increased capital adequacy ratio so that it can successfully pass the stress test, with which banks are evaluated by the Bank of Greece. Banks that do not cover the 8% index (which will grow to 10.50% by 2019) under the baseline scenario, will must directly raise share capital. In those banks which fail to do so their license will be withdrawn and their “good part” will be absorbed by a “systemic” bank. Having a double index in relation to the requisite, the Cooperative Bank of Karditsa successfully passed the last stress test, both in the baseline scenario and in the adverse scenario. It is the only bank in Greece that has capital adequacy both in the baseline scenario and in the adverse scenario. This fact enables the Bank to continue its work and to set the next steps for its development, without being influenced by the evolutions in the banking sector and without the agony and anxiety of others (Mitra, 2015: Interview of Mr. Boukis, Mr. Fillos and Mr. Tournavitis on ERT).

Its relationship with the client is based more on mutual understanding than on a profit relationship, and this is the main reason for which it is one of the few banks that did not need recapitalization, did not receive state aid not one euro and never joined in a consolidation programme. It implements its business plan exclusively with its own resources and it is an exception and a shining example for the Greek banking system. Thus, despite the conditions of dependence on the Emergency Liquidity Assistance (ELA) in most banks, and especially in large commercial banks and large cooperative banks, the Cooperative Bank of Karditsa did not need to be financed by ELA, as it had considerable available liquidity, mainly through its deposits in other banks, in sight and term accounts (Hatzidimitriou, 2017: Interview of Mr. Tournavitis to the Reporter.gr).

At the same time, it is a shining example for all the banks of the sector, by developing action initiatives in areas such as strengthening social entrepreneurship, and also actively participating in international forums and conferences. By way of example, mention should be made of its participation (it was the only bank from Greece) at the Microfinance Centre (MFC) conference, held in Prague in November 2015, where it presented its work and its effort to promote these forms of finance. Also, in December of the same year, in the context at the European Council in Luxembourg, it presented the results of the pilot project in which it participated, with the purpose of the establishment in our country of a new Fund for the Strengthening of the Social Economy. This initiative was funded by the European Commission and it should be noted that it started in the town of Karditsa from

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its Cooperative Bank (Mitra, 2015: Interview of Mr. Boukis, Mr. Fillos and Mr. Tournavitis on ERT).

In parallel, all the examples of projects which show that Social Economy is not the last resort to the crisis, but a real alternative solution to the economy, were presented in the European Forum hosted by the European Parliament (Papantoniou, 2016: Interview of Mr. Boukis and Mr. Tournavitis to the newspaper “Avgi”).

It also actively participates in conferences and initiatives to promote of Social and Solidarity Economy, such as the Social Entrepreneurship Supporting Net (SES Net), and co-organizes meetings for the development of the youth entrepreneurship and the start-ups (Hatzidimitriou, 2017: Interview of Mr. Tournavitis to the Reporter.gr).

The excellent quality of its financial data and its strategic planning have resulted in the Cooperative Bank of Karditsa to be the first Greek bank to sign an agreement with the European Investment Fund (EIF) in May 2016 (Tournavitis, 2016: Presentation at the Scientific Meeting on New Business Opportunities with Guide to Micro-credits).

Through of this cooperation will provided guarantees for microfinancing in enterprises, within the framework of the European Programme for Employment and Social Innovation (EaSI). The objective is to increase access to microfinance, in particular for vulnerable groups wishing to set up or develop their enterprises as well as micro-enterprises, through loans up to 25,000 euros. This new guarantee agreement covers a loan portfolio for more than 300 micro-borrowers, mainly farmers, young unemployed, cooperatives and social economy enterprises, as well as micro-enterprises which active in the context of the “green” economy. The 80% of each loan is guaranteed by the EIF (Mouzaki News, 2017: Press Conference of Mr. Boukis).

Following the agreement with the EIF, we should note the cooperation of the Cooperative Bank of Karditsa with the Women Center of Karditsa, within the framework of the implementation of the transnational project Daphne III entitled “WEGO! Women Economic-independence and Growth Opportunity”. The Bank will provide financial instruments on favorable terms to women who have been victims of domestic violence. The program is implemented in 7 countries of the European Union and the Women Center of Karditsa is the only Center that participates in Greece. The main aim of the project is to strengthen the services provided by Women Support Centers, the Refuges of Women and

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the Hostels, to women victims of domestic violence, and especially in the field of empowerment through the advisory procedure, in order to facilitate their access to the labor market, with ultimate aim their economic independence. Funding will be guaranteed in the context of the European programme EaSI (Mitra, 2017).

The Bank also participates in the ETEAN (Hellenic Fund for Entrepreneurship and Development) programs, with an aim of co-investing and co-financing new financial tools. These tools aim, with specialized and appropriate products, to facilitate the access of Greek enterprises to finance. In this way, the creation and development of sustainable enterprises in innovative, dynamic and promising sectors and activities of the economy is strengthened (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

And, of course, a very important event is its membership, after being evaluated in 2015, in the European Federation of Ethical and Alternative Banks (FEBEA). Underneath the FEBEA umbrella are united banking and financial institutions that aim to finance of the social economy and the solidarity-centered economy (Hatzidimitriou, 2017: Interview of Mr. Tournavitis to the Reporter.gr).

Thus, it was certified as the first (and the only one to date) Ethical Bank in Greece. This is a certification process that will enable the Bank to have access to good corporate governance practices, synergies and funding tools that will facilitate its work in promoting support for local enterprises and the structures of the Prefecture (Nikolaou and Papafilippou, 2016: Interview of Mr. Tournavitis on FM 100.6).

In March 2016, the annual conference of FEBEA members took place in Karditsa, where representatives of Ethical and Alternative Banks of Europe were arrived to the town, thus acknowledging the Bank and the region in the European landscape (www.bankofkarditsa.gr).

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7.8 Analysis of Strengths, Weaknesses, Opportunities and Threats (SWOT)

STRENGTHS WEAKNESSES

- Providing of products and services that - Activity only in the Prefecture of responding to the needs of the real Karditsa, in contrast to the Cooperative economy of the local community and not Bank of Thessaly, which active in all four

products that include a high risk. Prefectures of Thessaly.

- Immediate adaptation to modern - There is not much dispersal in the kinds corporate governance principles by of clients, since the vast majority is small changing its organizational and operational and medium-sized enterprises. structure

- High capital adequacy ratio of 17.93% (almost more than double of foreseen).

- The existence, all years, of a high amount E R N A L F A C T S R O C A F L A EN R of deposits in relation to loans.

I N T T N I - Ease of client service, through physical

branches, but also through e-banking.

- Continuous increasing in the number of Bank members. - The confidence of the local community

towards the Bank. OPPORTUNITIES THREATS

- Reducing client confidence in large - The existing economic environment of commercial banks is an opportunity for our country and the essential uncertainties local cooperative banks. that result from it.

- The increase of the use of e-banking, - Continuation of restrictions on the especially after 2015 due to the imposition movement of capital (capital controls). of capital controls. - The expansion to new microfinance - The competitive environment with the products with guarantee of the European existence of another five banks in the Investment Fund (EIF). same Prefecture. - The possibilities for increased penetration into clients from the agricultural sector, E X T E R N A L F A C T S R O EC A F L A E T X N R since the Prefecture of Karditsa is predominantly a rural area. Table 8: SWOT Analysis of the Cooperative Bank of Karditsa

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The above table summarizes the results of the SWOT analysis of the Cooperative Bank of Karditsa. SWOT analysis is a basic strategic planning and decision-making tool that examines the Strengths and Weaknesses of the internal environment of enterprises and the Opportunities and Threats of their external environment (Fine, 2009).

7.9 Basic conclusions of the Case Study

The study of the Cooperative Bank of Karditsa demonstrates that even under this difficult economic conjuncture a local cooperative bank was able, by making the right choices, not only to survive the crisis but also to have a successful course within it. By offering products and services related to the development of the local real economy and the social economy, it managed to gain the confidence of the local community. Behind the numbers, it sees the human, and this fact is the basis of its strategic planning.

Its main advantage is that it was essentially created by the needs of the local community and thus has direct contact with it and a great knowledge of its problems. The profits of the Bank return to its members and to the local community. Its shareholders are small shareholders who are a part of the local community. Thus, they are interested in the development of both the Bank and the local economy. A crucial factor for its successful development was the fact that during the crisis, while other banks shrank and stopped funding, it followed an expansionary course. Thus, it increased its branches and with its funding helped the local economy, especially small and medium-sized enterprises.

A very basic reason for its survival and development in a time of crisis was its high capital adequacy and its considerable available liquidity. In this way, it did not have problems with the stress tests of the Bank of Greece and did not need recapitalizations and state aids.

Particularly important is its organizational and administrative operation. It has been directly adapted to the conditions set by the new law on the corporate governance, while the frequent meetings of its Management Board have a positive impact on its operation. The observations and suggestions of the members are taken seriously. Thus the Bank is improving and, of course, its members also benefit.

In closing, we should emphasize that a small bank can succeed, even in times of crisis, by developing actions to strengthen social entrepreneurship, promote microfinance (especially of the vulnerable groups) and support for the solidarity-based economy. To

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develop a bank does not need to be oriented to the development of the numbers, but to the development of people and local societies.

7.10 Questions for discussion

1. What strategy was followed by the Cooperative Bank of Karditsa and how do you think that this strategy helped survive and develop during the economic crisis? 2. What were the factors that you believe contributed to the success of the Cooperative Bank of Karditsa in the period of the economic crisis? 3. What do you think would be the financial situation of the Cooperative Bank of Karditsa today, if it had not done the actions mentioned, in order to manage the economic crisis? 4. Can the Cooperative Bank of Karditsa continue its economic development through its existing strategy? 5. What are the main conclusions and lessons learned from this Case Study?

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8. Conclusions

The current economic crisis, in which Greece entered, has shown that the classic model of banks is characterized by a number of problems. The pursuit of profit in any way and the use of high-risk products led many Greek banks to collapse, while those withstood try to survive, but faced with liquidity problems, thus stopping funding. Until a few years ago, the Greek banking sector was on a path of growth and had surpassed the national borders, as the largest banks in our country had established subsidiaries, mainly in the Balkan and Eastern European countries. In recent years, however, the sector has shrunk so much and has such problems that it will be needed a very long and intense effort to make Greek banks once again go to the levels of the past.

The problems for the banks of Greece began because of the last global economic crisis, which also affected our country. In Greece, it initially appeared in the form of a sovereign debt crisis. And because our country is a member of the Euro-area, it has necessarily followed a policy that was based on the commands of the European Central Bank and the European Union. This policy, however, was a policy of austerity which, instead of reducing the crisis, extended it even longer. With the “haircut” of the debt and the PSI in 2012, a major blow to the capital adequacy of Greek banks was created, and thus, the crisis was transformed into a banking crisis. Then we also had the capital controls in 2015, which made the situation even worse. So, while banks should be the key driver for the recovery of the Greek economy and the exit from the crisis, by contrast they have dramatically reduced funding to the real economy, as result the economic stagnation is continuing. Most citizens now don't trust the banks as they did in the past, and even consider them, main responsible for the situation in which our country has fallen.

The crisis, however, is not only economic. It is also social and humanitarian, since a large part of the population remains unemployed and lives at the poverty line. Because of this economic and social difficult situation, banks should not turn their backs on all these people who are facing huge problems but instead should help them in order to have a total benefit for the whole of society. Corporate Social Responsibility of banks should not remain in individual actions (which certainly benefit some people, for even a short time) but should be generalized in their daily operation and be their main feature. If the social responsibility of the banks is not generalized now, with the huge social problem in our

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country, when will it be generalized? Banks should help small and medium-sized enterprises that are the backbone of the Greek economy, young farmers, women who want to set up their enterprises, the unemployed trying for their vocational rehabilitation. Funding should be done without social exclusions and solely on the basis of the interest and the development of the real economy. Banks should have products and services that meet the needs of the real economy and not products that present a high risk and offer nothing to society. By this way, the social balance will return to our country. If banks don't help in this period, when Greece faces a very crucial economic and social situation, then we will have a social responsibility of the banks but without social impact. The question is whether the banking sector in its known form may be part of the solution to the problem or whether the existing policy will contribute to prolongation of the problem.

In these circumstances, it is imperative to apply a different, alternative and ethical bank model, which, through its operation, will help in the economic and social recovery of our country. Ethical and Alternative Banks that operate in many countries, with their resilience and development in the years of the last global financial crisis, have proven to be a promising and optimistic banking and economic proposal. Their characteristic is social and environmental ethics, which is directly related to Corporate Social Responsibility. These banks are not based on the pursuit of excessive profits but are human-centered with a socially and environmentally oriented. Ethical and Alternative Banks aim the development of local societies. They try to achieve this, by promoting the sustainable development of the social economy and entrepreneurship. Financing is directed to people who really need it. Most of their clients are micro-entrepreneurs, unemployed, women, farmers and various vulnerable groups who, through microfinance, try to create their own enterprises and thus escape from the poverty. A basic principle of Ethics and Alternative Banks is that all people, without exceptions and social exclusions, have the right to the credit. Thus, they finance every entrepreneurial effort, which, after thorough check, proves to be sustainable. The profits of these banks return as credits to local communities, thus helping to develop of local economies and improve of people's living standards. None enterprise activity is funded, if from this doesn't benefit the society as a whole and if this doesn't support the environmental development.

Today, Ethical and Alternative Banks can be a complementary part, with a small percentage of the total banking sector, but certainly their way of operation and the policy

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they follow can be a bright example for all other banks. This would have a significant social impact, since when banks first see people and then numbers, then everyone benefits. Ethics and banking can be combined and should not be regarded as two notions that are incompatible with each other, but as two communicating vessels, which can benefit the whole of society. Funding from the banks, in ethical terms and without social exclusion, should be a key factor in resolving economic and social crises, as is the case today of our country. Bank profits should not be turned into excessive profits for some, through the creation of high risk products and services, but should return to the real economy in the form of funding, to those sectors, which by their operating, promote the development of the local communities. What we see in the classic banking sector is that the profits of the banks are shared by some people, but we all share their losses. The examples of Greek banks are characteristic. This fact, however, can neither be characterized ethical, nor can it be considered as the most appropriate practice from an economic and social point of view. On the contrary, Ethical Banks have as their main practice the reallocation of funds they accumulate into activities that aim at sustainable development and have a social, environmental and cultural orientation. The size and value of a bank should not be measured only by its financial performances but also by its social performances.

The institution of Ethical Banks may not be as well developed in Greece as in other countries but, nevertheless, corporate social responsibility of classic commercial banks as well as micro-credit policy and the strengthening of local economies and societies by cooperative banks should be further developed. In particular, cooperative banks should be a basic alternative pillar of the Greek banking sector, as their policy and philosophy are more in line with the principles of Ethical Banks abroad. In the current economic and social conditions of our country, the development of the cooperative banking sector can be an alternative solution.

And of course, it goes without saying that Ethical Banking should not be isolated from modern technology and electronic banking services that are applied by classic banks. Electronic banking and the opportunities it offers can help even more to the aims of Ethical Banks and make it easier for both their operation and their clients service.

The key question is whether these policies, which are characterized by the principles of Ethical Banks, can also be applied in our country. Can there be banks in Greece, which will be able to transform the theoretical principles of ethical banking in the practice? And

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mainly, can they be developed and have a successful course, especially in a period of economic crisis? Because, in order for a bank to operate, it must of course present profits (but fair profits). Of course, its economic indicators should be such that they will make it a viable bank that, with its operation, will be able to increase its social indicators as well. How is it feasible for a Greek bank to finance without social exclusions, return its profits to local communities, look first at people and then numbers, and at the same time manage to develop and have a successful course? The answer may have been negative if there was no specific example of a Greek bank that would combine its economic development with its social orientation.

In Greece, the Cooperative Bank of Karditsa constitutes a bright example for the banking sector. With its philosophy and strategy, it proven that also in our country there can be and succeed in an alternative banking proposal, that may not bring excessive profits but it proves viable and offers benefits to local society and the economy. It operates in terms of both financial and social benefits, promoting a new model of financing with an impact on the real economy.

Greek banks have great margin for the development of sustainable, social and environmental, banking products. Integrating a strategy with social and ethical philosophy can be a great competitive advantage for any bank that applies it. Lack of confidence in the classic banking system during the crisis is a very basic reason for which the banks should change philosophy and orientation by putting people above the numbers. The demand to adopt ethical values in the banking sector, is today more intense than ever. The future of Greek banks should be characterized by the complete revision of their operation and the provision of socially responsible banking products. Such a type of bank must be the solution to the current banking reality in Greece. The future of Greek banks should be based on the substantive concept of social solidarity, environmental consciousness and the development of the whole of society, without exclusions.

Having as an example the successful course of the Cooperative Bank of Karditsa, we can feel optimistic about the future of the Greek banking sector. If the Cooperative Bank of Karditsa was able to succeed, then and the other banks could succeed. A prerequisite, of course, for changing the image in the banking sector is the targeting of the banks in actions that strengthen the real economy and promote the social economy. Cooperative banks should be a main pillar of the banking sector in our country, as with their operation the

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development of local societies is promoted. The main aim of the banks, whether commercial banks or cooperative banks, should be people and not excessive profits. Of course, banks generate profits from their operation. But these profits should be returned as granting of loans to the real economy and should be invested in the development of society. Clients recognize this fact and thus it is created a relationship of trust with their bank. It is no coincidence that during the crisis and while other banks were shrinking and losing their clients, the Cooperative Bank of Karditsa raised over 50% its members, deposits and loans. The Bank during the crisis helped the real economy of the local community, and the local community in turn showed its confidence in the Bank. By this way benefited both.

With successful management and philosophy that manages to harmoniously combine social orientation with the technocratic-economic orientation, the Cooperative Bank of Karditsa proves that a different type of banks is possible. Its relationship with the local community is a relationship of trust, since with its strategy there is a benefit to both sides. The Bank is an important development tool for the region and is trying to find solutions for the needs of both citizens and local communities in general. The impressive increase of the members, the deposits and lending during the crisis, the very high capital adequacy and the implementation of its business plan exclusively with its own resources (without state aids and funding from ELA), lead to the conclusion that there may be socially oriented banks in Greece.

The social character of the Cooperative Bank of Karditsa and its course in the difficult economic environment of our country during the crisis, make it an example of alternative banking and should be studied and exploited by the classic banking system, which is facing a problem of viability. This alternative model of social and solidarity-based economy, that has managed to cope with the crisis at the local level, could be as an example, creating perspectives to escape our country from the productive and economic recession.

The Social Economy can be a real alternative to the growth of the economy, and banks such as the Cooperative Bank of Karditsa can play an important role in achieving this aim. A bank that was created by the needs of the local community will certainly have direct contact with it and a great knowledge of its problems. The local community should trust

Postgraduate Dissertation 103 Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

the bank, and the bank should help the local community and return to it, its profits and capital it collects.

Thus, the conclusion from the analysis of the operation of the Cooperative Bank of Karditsa is that a different type of bank can operate in our country. The case of the Cooperative Bank of Karditsa should not go unnoticed, but instead should be an example of further research and study. Irrespective of its small size, it does not cease to be a successful example of a different type of bank. Therefore, it should be considered as a reference point and not simply as an exception to the troubled banking sector in our country. If each local community has its own bank, responding to its needs and problems, then many local banks will help to develop society as a whole. In the current economic and social situation, the orientation towards the model of cooperative banks is the one that fits most for our country. The development of such banks could also be the first step in creating Ethical and Alternative Banks in Greece, in the form they operate in other countries.

Postgraduate Dissertation 104 Argyro-Ioanna Papadopoulou, The future of the banking sector in Greece. Options of a different type of bank.

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Author’s Statement: I hereby expressly declare that, according to the article 8 of Law 1559/1986, this dissertation is solely the product of my personal work, does not infringe any intellectual property, personality and personal data rights of third parties, does not contain works/contributions from third parties for which the permission of the authors/beneficiaries is required, is not the product of partial or total plagiarism, and that the sources used are limited to the literature references alone and meet the rules of scientific citations.

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