Banking System Of Greece Example For Free - Free Essay Example

Sample details Pages: 12 Words: 3522 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Tags: Banking Essay Did you like this example? The Central Bank of Greece is called the Bank of Greece. Its head quarter is in Athens. It is established in 1927. Don’t waste time! Our writers will create an original "Banking System Of Greece Example For Free" essay for you Create order It is preceded by National Bank of Greece (1928) and succeeded by European Central Bank (2001). The Bank of Greece is still exists but most of the functions are performed by the ECB.The bank has 18 branches, 38 agencies and 8 outlets. The responsibilities of this bank are to implement the Euro systems monitory policy and also safe its own country financial system. In other primary objectives the stability of general price level. It also supports the general policy of the government. It has institutional, personal and operational independency. It is under the super vision of Greece Parliament. The Bank of Greece has more than 3000 employees. It also supervises the other all private banks in all over the country. The other function of it is to act as the treasurer and fiscal agent for the Greek  government. Its Euro Banknote code is Y. Bank of Greece also sells  Gold sovereigns. Bank of Greece Division of tasks is as follows: Euro system-Related Tasks Monetary policy Foreign exchange and reserve assets Payment and settlement systems Financial stability Statistics Banknotes and coins Other Tasks of the Bank of Greece Supervision Payment and securities settlement system Reserve assets Treasurer and fiscal agent of the government Statistics Research and publications Administration and Management There are governor and deputy governors who manage all the functions of the bank. Governor Georgios A. Provopoulos is the governor of the bank with effect from June 20, 2008 who manages the bank operation with the following deputy governors. The Governor is the chief officer of the bank and is appointed by the government. He supervises monitory policy. Deputy Governors Panagiotis Aristidis Thomopoulos and Nikolaos D. Paleocrassas are the deputy governor of the Central Bank of Greece. The deputy governor is the second in line officer of the bank. Main role of the deputy governor is administration. Eleni Dendrinou-Louri: June 15, 2008 present. Ioannis M. Papadakis: March 3, 2009 present. 160px-2003_Greece_200_Euro_75_anniversary_of_Bank_of_Greece_back Organization Chart Organisation Chart for Bank of Greece Commercial Banks These are the second type of financial institutions in the Greece Economy. Likes the commercial banks they are the deposit institutions in both commercial and industrial sector. They perform lending operations. They recently expand their working area to provide banking services at a wide range of whole sellers and retailers. They give loans in different types like: Commercial Industrial Consumers Mortgage credit The different functions which are performed by these banks: Issuance of credit cards Travelers checks Buy and sell foreign exchange Issuance of letter of credit They directly engage in securities underwriting. They also give foreign securities, own mutual funds and brokerage services through their subsidiaries. The commercial banks which are operating in Greek, they include both domestic and foreign institutions. The institutions of such type are increasing constantly in the Greek. The strength of these banks In Greece in1992 was twenty t wo Greek banks and eighteen foreign banks in operation. The foreign banks control 10 percent of the assets and deposits in the Greek banking market. All these operations are done by the foreign banks locally established branches. In all the Greek banks the Central Bank of Greece is the largest institution. In 1991it was controlling 29 percent of banking assets and 37 percent of deposits. The largest foreign bank in all other foreign banks is the Citibank. It is New York based. This bank in 1991 controlled the one fourth of the assets and one third one the deposits held by the foreign banks in Greece. The major assets of the commercial banks include the credits and loans to the private sector. In the end of 1980s the portfolio of the banks has been changed due to the heavy borrowing requirement of the state. The assets proportion of the banks is as follows in which one third are made up of government securities. It is equal to the share devoted to the loans and securities. Due to private deposits the liability of the commercial banks continued. Since 1987 the Greek Banking has completely adopt the liberalization. Interest rates are set now according to the market conditions. There no restriction on entry into banking. Foreign exchange transactions along with capital movement have been deregulated. Quality control on credit has been long abolished. During the implementation stage in 1995 the EU (European Union) directives on the freedom of bank establishment among the members country. It is all about providing the free financial services across the borders and standards of capital adequacy should be common. Now the banking in Greece is becoming most modern and very competitive business. Major Commercial Banks The major Commercial Banks in the Greece are as follows: Proton Bank T Bank Alpha Bank ATE bank Attica Bank Bank of Cyprus Citibank EFG Euro bank Ergasias Emporiki Bank First Business Bank Geniki Bank Hellenic Bank HSBC HypoVereinsbank Marfin Egnatia Bank Millennium Bank National Bank of Greece Piraeus Bank Probank TT Hellenic Postbank Specialized Credit Institutions Specialized credit institutions are the third type of institutions in the Greece Banking system. The examples of such institutions are as follows: Investment Banks Agriculture Bank of Greece Mortgage Banks Postal Saving Banks The functions of these banks to provide and offer credit in their particular areas. This is their traditional role. But now banking liberalization and enforcement of European policies that banking market should be unfiled and the specialized institutions should vast their operations rather than in designated areas. To determine the specialization in 1990s in a specific area it is determined by the market condition not by the legislative constraint. Agriculture Bank is the major example of this change. This Bank was strictly legally restricted to granting agriculture loan. As a result its distribution is turned into monopolized. After a year in1991 the Agriculture Bank is converted into a full-fledged commercial bank and when this process i s taken placed at the same time other commercial banks also have a permission to grant agriculture loans. The same conversion occurred with mortgage and investment banks. Most of the credit institutions in Greece are directly or indirectly controlled by the government. The example of this is the Industrial Development Bank of the Greece. It is 100 percent owned by the government. The two largest main commercial banks, one of which is the National Bank and other is the Commercial Bank of Greece, these are held by the employees pension fund and have been managed by the state. The legislation changes have been made by the state recently seeks to moderate by giving a degree of self-management to employee pension fund. The shares are now traded on the stock exchange. National Bank of Greek and Commercial Bank of Greek owned the medium-size lonian Bank of Greek. This is a small subsidiary bank. The Greek Financial Intermediaries (a) Credit institutions Commercial banks Specialized credit institution Corporative banks (b) Credit companies (c) Financial institutions Factoring companies Leasing companies Credit card issuers Exchange bureaus Money transfer mediation companies (d) Market intermediaries providing investment services On a collective basis (mutual fund management companies and investment fund management companies). On an individual basis (investment firms) Financial Markets The financial sectors importance in Greece surpasses its proportional contribution to the countrys GDP, which in 1990 stood at about 3 percent. Besides its traditional functions in collecting savings and reallocating them by lending, the financial system in Greece, as in many advanced countries, has begun to perform a variety of other services such as underwriting new security issues, corporate services for acquisitions and restructuring, wealth and portfolio management, and leasing. In the early 1990s, the capital market for securities also has grown quickly, and the volume and frequency of transactions on the Athens Stock Exchange have multiplied. The following financial markets are present in the Greece. Athens Stock Exchange The Athens Stock Exchange is named as ASE or ATHEX it is located in Athens Greek. Its start its function from 1876. It is the subsidiary of the Hellenic exchange. Another market in1999 starts its trading which is called Athens Derivative exchange. In 2002 both the companies were merged to form Athens Stock Exchange. At 2007 it was located in Psiris on Sofocleous Street. Now a days its new headquarter is in Kavalas Street. The Athens Stock Exchange (ASE) work under the supervision of Capital Market Commission (CMC). It is primarily responsible for the protection of investors. The Athens Stock Exchange (ASE) has also adopted important changes about modernization and revitalization since 1987. The main institutional changes of the present time are Establishment of a Central Securities Depository Introduction of an automated trading system In 1993 market capitalization of the shares listed was US$13.5 billion, and the total value of market transactions was US$2.8 billion. B etween 1990 and 1993, fifty-seven listings were added, bringing the total number of companies with listed stocks to 150. New capital raised in 1993 through stock issues amounted to US$436 million. Plans call for enhancement of stock-exchange operations by linking of the Athens exchange with peripheral terminals such as Thessaloniki and by encouraging foreign companiesmost notably those in the Balkansto list their shares on the exchange. To make more strengthen the role of the stock exchange and to maintain the banking competition in the mid 1990s government made the policies in the financial area especially for these institutions. The new competition in the banking sector leads to appearance of new products and services. In banking products most dominant is the automatic teller machine (ATM). Due to a safe and easy ay most of the market leaders forced banks to adopt it. For this purpose an initiative has been taken to make an automated interbank clearing and payment system in Gre ek. The large banks of Greek which involve in movement restrictions and clear protection of the currency deflected risky transactions on the drachma that could result in sudden devaluation. Before come into the European Union the currency of the Greece was drachma. Since 1987 the exchange rate of the drachma faces gradual devaluation due to elimination of Greek short term capital. Athens Derivatives the Exchange S.A. (ADEX) The main purpose of the ADEX is the organization and support of trading in the derivatives market, the organization of the trading system as well as any other similar activities. The Athens Derivatives Exchange S.A. (ADEX) and the Athens Derivatives Exchange Clearing House S.A (ADECH) have been established for the organization, operation, and development of the market. The main purpose of ADEX was the organization and support of trading in the derivatives market, the organization of the trading system as well as any similar activity. At the same time, ADECH is to organize the clearing and settlement of transactions concluded on derivative products, and supports such procedures in general. The Capital Market Commission, exercises control and supervision on ADEXs and ADECHs operation, in respect to the adherence to the rules and regulations of the capital market. ADEX, with an initial series of products such as Futures on the FTSE/ASE-20 and FTSE/ASE Mid 40 indices, Futures on the 10-year Hellenic Republic Bond, Options based on the FTSE/ASE-20 and FTSE/ASE Mid 40 indices, Stock Options, Stock Lending, covered an investment need that existed, and became imperative during latest years. The General Assemblies of the Athens Stock Exchange S.A. and the Athens Derivatives Exchange S.A. that were held on July 17th 2002 approved the Draft Merger Agreement of the two companies and the modifications in the Articles of Association of A.E. S.A. The corporate name of the new company is Athens Exchange S.A. The merger of the two companies was approved by the respective General Assemblies within the framework of further rationalization of the parent company Hellenic Exchanges S.A. (HELEX) that owns directly and indirectly 100% of the stocks in both companies. In addition, the merger of ASE and ADEX is in line with the global trend for mergers between stock and derivatives exchanges and is aiming to achieve synergies in the activities of the two, to lower the oper ating costs and to improve the overall coordination of the two markets. The purpose of the new company will be the organization, support and monitoring of transactions related to stocks, derivatives and other financial products, the smooth operation of the market, the protection of investors and other related activities. The qualified personnel of the new company will continue to offer the same high level of services regarding market support as in the past. In general, investors through the use of derivatives can : https://www.adex.ase.gr/AdexImages/blank.gif https://www.adex.ase.gr/AdexImages/blank.gif Quickly materialize their investment policies with only one decision, the trading of futures derivatives on the index. This is very important to a global market which exhibits high volatility. https://www.adex.ase.gr/AdexImages/blank.gif https://www.adex.ase.gr/AdexImages/blank.gif Participate in bullish markets through the use of margins, where the investor n eeds to have only a fraction of the initial capital and consequently achieve a higher percentage return. https://www.adex.ase.gr/AdexImages/blank.gif https://www.adex.ase.gr/AdexImages/blank.gif Protect their underlying investment in stocks of A.E. S.A., without having to liquidate their position, through the use of static or dynamic hedging strategies. Operational Structure Following are the participant which include in the operation. ADECH:  carries out the clearing by acting as counterparty in all trades that get registered in the derivatives market. ADECH also: (i) calculates all investors obligations that arise from their participation in this market and (ii) defines the margins to be deposited by the participants. Members of ADECH:  represent the end-client on the daily settlement process. They manage the margin accounts of their clients, which are kept in the Margin Bank of their choice. For the purposes of daily settlement members are maintaining settlement accounts in the settlement bank. Custodian banks:  which are approved by ADECH are maintaining all the margin accounts of the clients, where margins have to be deposited. Settlement bank:  chosen by ADECH maintains all the necessary accounts for the daily settlement. CSD:  (Central Securities Depository) maintains all the securities acco unts of the clients and ADECH which are necessary for the daily settlement and margining (when stocks will be accepted for margin purposes). Clients:  must cover all margin requirements and obligations arising from the daily settlement. Clients are considered to be physical and legal entities that can execute trades in the derivatives market. Members of ADECH which are at the same time members of Derivatives Market as market makers are considered to be clients. The Market for Government Securities: The Bank of Greece has developed an electronic secondary securities market (HDAT) and a settlement system (BOGS) for trading and settling Greek government securities in book-entry form. The government security market come into existence as a result of the of the government debt and liberalization of financial sector in the mid 90s. Its was established (OTC) basis. In the market there are two type of participant one are primary dealers and other are the secondary dealers. The task of the primary dealers is to fulfill the requirement of the market with their market making activities. HDATs trading system is electronic. HDAT soon became a successful trading venue. In HDAT Role of the Bank of Greece is important. It acts as a operator and host. As an operator the Governor of the Bank appoints the supervisory committee, this committee has 7 members. IN which 2 from the Bank of Greece, 3 representatives of primary dealers and 2 from secondary dealers. The other role of the committe e is relation with the Hellenic Republics securities. Eight members from the Ministry of finance present in this. Fake government debt is traded on HADT. Government debt securities in all local institutional portfolios are required by law to be marked to market on a daily basis using market prices, as the latter appear in HDATs daily price bulletin. This considerably increases the significance of price formation in HDAT. HDAT is linked electronically and in real-time with information systems such as Telerate, Reuters and Bloomberg. This way, trading information is widely diffused, promoting transparency. HDAT was designed, from the outset, to be a wholesale market reserved for institutional investors. Being a quote-driven market, firm two ways anonymous quotes are always available from the market makers. Market participants can see the best quotes at any time but anonymity remains until a trade is crossed. At that stage, the identity of the counterparties (the buyer and the selle r) is, albeit, only between them. A minimum number of five quotes per issue are set by regulation, and members can see all active quotes posted in the system. Participants enter buy or sell orders when they see a price at which they wish to trade. By specifying the quantity for which they intend to transact, they are also allowed to indicate a price limit up to which they commit themselves if the desired quantity is higher than the one available at the best price. Orders are matched automatically by the system and the transactions are finalized by DVP (Delivery versus Payment). Simultaneous accounting entries (credit/debit) take place as regards the securities-leg the cash-leg of any transaction, a procedure that substantially reduces systemic risk in clearing and settlement. All transactions are settled with a value date of T+3. The price of a security published in the HDAT Bulletin is the best bid price drawn for this security at a random moment during the day, usually towar ds the end of the trading session. HDATs operating hours are from 10 a.m. to 5 p.m., the first 15 minutes being a preparatory period during which market makers prepare their quotes. During this preparatory period, each market maker has access only to his own quotes which are not revealed to the rest of market. Quotation of prices and quantities in HDAT are subject to two main regulatory restrictions: A maximum bid-ask price spread and a minimum quote size. The maximum bid-ask spread was initially set at 50 bps, a level which, at the time, was considered satisfactorily low compared to the levels prevailing in the OTC market (especially when taking into account the fact that the spread widened to 555 bps during the 1997 South-East Asia financial crisis). The achievement of a relatively low spread was sufficiently tested during the next period of turmoil which took place while HDAT was in operation, the 1998 Russian crisis, when the bid-ask spread inevitably widened but only to a maximum of 90 basis points. Since May 2001, the maximum bid-ask spread varies in accordance with the Residual maturity of the security and reaches 15 bps for maturities exceeding 11 years. The maximum bid-ask spread for maturities up to 5 years is 7 bps while for the Maturities from 5 to 11 years are 10 bps. The uniform, i.e. regardless of residual Maturity, maximum spread imposed initially was gradually brought down considerably. It was reduced to 25 bps in December 1999 and subsequently to 20 bps in June 2000, to 15 bps in October 2000 and to 10 bps in January 2001, when the Country joined EMU. Currently, the minimum quote size represents an offer for 10 lots, while any order above the minimum should be a multiple of 1 lot (1 lot = 500,000 Euros). When 13HDAT started its operations, 1 lot was equivalent to one hundred million Greek Drachmas (about 293,000 Euros) and the minimum quote size was 5 lots. Subsequently, the minimum quote size was first doubled to 10 lots and from 1 December 1999 was increased to 20 lots (or a total face value of approximately 5,869,406 Euros). From 2 January 2001, the value was adjusted to the current minimum of 5 million Euros. An order to buy or sell a security includes the price, the size and the time stamp. Price is the first parameter used to determine the best offer. Subsequently, when there are multiple offers at the same price, priority is given to the largest size. Among offers of the same price and size, the best is considered to be the one that has been first posted in the system. HDAT started to operate with 13 primary dealers and 23 secondary dealers, thus a total of 36 market participants, among which 21 were Greek credit and financial institutions and 15 were local branches of foreign banks. The total number of market participants has remained roughly constant over the years. Its composition, nevertheless, has been considerably modified. The number of HDAT members and their classification into primary and secondary dealers is set at the beginning of each year jointly by the Finance Minister and the Governor of the Bank of Greece. During 2004, 20 financial institutions were acting as primary dealers among which, 5 were Greek credit institutions and the remaining 15 are foreign institutions, few of which have branches in Greece. The securities that each primary dealer is obliged to quote for are also determined at the beginning of each year and include all the benchmark issues as well as a number of additional securities attributed to each dealer. Those market participants who are not located in Greece are granted remote access to trading and for this purpose have at their disposal HDAT screens in their location. Remote access was not an option when the market was launched and it was only introduced in mid-2000. Undoubtedly, this development had a significant.