A loud intervention in the banks regarding their excessive profits is expected in the coming days from the government. According to information, the legislative regulation to reduce by 50% the high fees they charge citizens for their transactions is considered certain.

The second intervention, which touches on the acute housing problem, concerns the stock of 20,000 properties held by the banks. The same sources report that government pressures for the disposal of these properties on the market will involve a significant increase in taxation on them.

Other interventions will aim at providing more loans to small and medium-sized businesses and households, lower charges, better interest rates, fewer problems with transactions, and will be announced in the coming days by the Prime Minister.

The Minister of National Economy and Finance, Kostis Hatzidakis, speaks of a “balanced” package of measures that will improve citizens’ daily lives in their transactions with banks without harming the stability of the banking system. The government is monitoring and has recorded issues that cause citizens to be dissatisfied, such as differences in loan and deposit interest rates, bank charges, and loans to small and medium-sized businesses. It is expected to present a package of measures that will address 5 areas:

Reduction of charges: The pricing policy of loans and deposits has become a “burden” for businesses and households. Dozens of fees on cards, POS, wire transfers, etc., bring huge profits to the banks. For example, for the replacement of an expired ATM card, customers are charged 5 or even 10 euros for its renewal every two years. The economic team believes that the new package of measures will lead to a reduction of up to 50% in bank fees.

Credit expansion: Banks are called upon to increase loans, as well as the range of customers eligible to receive them. At a time when small and medium-sized businesses and households are under significant pressure, the goal is to increase competition so that loans can be given to address the housing problem as well as the liquidity needs of businesses.

Increase in deposit interest rates – reduction in loan rates: Interest rates are falling worldwide, but the gap between deposit and loan rates in Greece is enormous. With high inflation, depositors feel their money is being severely devalued. Greek banks are reluctant to raise interest rates because billions of euros in deposits are stagnating after the support measures for the pandemic. Both the government and the Bank of Greece are concerned about the risk of capital flight abroad. However, it seems that banks are not worried about competition from abroad because “big clients” are finding better returns in private banking. “We will make an intervention that will not send negative signals to the markets,” says Mr. Hatzidakis, as the economic team knows they have no legislative regulation power, only the ability to exert indirect pressure on bankers. Measures to strengthen competition in interest rates are being prioritized, especially since foreign banks offer 10 or 100 times higher interest rates, and nothing prevents depositors from seeking solutions like Switzerland, which was once a trend, and it took years for the money to return to the country.

Rewarding consistent clients and supporting vulnerable groups: The government is calling for greater “sensitivity” from banks. Banks and servicers are being urged to prevent difficulties, offer solutions, and distinguish small debts from those of people with no means so that they can focus on more “productive” debt recovery efforts.

Expansion of direct IRIS payments: Another factor increasing competition compared to traditional banking products is the increase in the free transfer limits via IRIS. Initially, a daily limit of 500 euros for friends and an additional 500 for businesses will be introduced in March or April.

What they charge in Greece, what applies in Europe

Greek systemic banks charge fees many times higher than several European banks, while offering almost zero returns on the large volume of customer deposits. The fee for withdrawing even a small amount, around 20 euros, from an ATM of another bank can exceed 2 euros, which is 10%!

For a transfer to an EU country, fees vary for amounts under 1,000 euros, from 4 to 31 euros, while in Cyprus, a country considered expensive for banking transactions, the same transfer has no fees!

Bank fees in Germany, for example, are lower than in Greek banks, while German banks offer a savings account interest rate of 0.57% compared to 0.030% in Greek banks!

If, for any reason, someone wishes to make an appointment at a bank branch, it will take place three days later if they are lucky, and could take up to 8 working days if they are less fortunate. Let’s not mention the kilometers some people are forced to travel in rural areas because the bank branches in their area have closed.

These and many other factors are testing the already difficult daily life of the Greek citizen, while for professionals, the bank has long ceased to be their ally.

This is also the reason why not once, but at least five times so far, the government has openly expressed its displeasure to the bankers, urging them to find a solution. If we were to categorize the country’s banking system, we would focus on four main axes:

Fees and commissions

The very high interest income and commissions from banks have recently fueled dissatisfaction among the customer base of the country’s credit system.

The commissions of the four systemic banks are expected to exceed 2 billion euros this year. At the same time, so-called “popular” commissions, those related to payments and wire transfers, are very small compared to the total and will not exceed 60-80 million euros in 2024. Therefore, it is surprising why the banks have not reduced these so-called “popular charges” despite ongoing complaints.

Examples:

For a transfer under 1,000 euros to a bank in an EU country, same-day with only the sender’s bank fee, the commission can reach up to 31.20 euros, while the regular priority service costs 21.20 euros. Other banks charge a fee closer to 4 euros for the same services.

The cash withdrawal fee from an ATM of a different bank, regardless of the amount, ranges from 0.75 to 2.5 euros. Thus, for withdrawals of 20 euros, the fee can reach 10% if withdrawn from another bank’s ATM.

The fee for making mobile phone or electricity payments is 0.60 euros per transaction at most banks, regardless of the amount, while transactions with public agencies remain free of charge.

In the previous period, banks attempted to achieve a friendlier pricing policy towards consumers by offering a set of charge packages. The philosophy was as follows: with a one-time monthly amount, bank customers would not be charged any other fees for their transactions. However, this does not seem to have worked sufficiently, as the packages differ, consumers use more than one bank, and ultimately, the transactions they make may not be enough to justify the cost-benefit relationship.

It should be noted that bank fees are very high and also a key item on the government’s agenda. The 50% reduction in fees for small transactions up to 10 euros via POS is part of the Ministry of Finance’s plans. The government aims to reduce bank fees not only for small transactions but also for larger ones, with high frequency, combined with the elimination of other intermediary charges.

To exert pressure on banks, the government will extend the IRIS system, while at the same time, the Bank of Greece is creating a fee monitoring system that everyone will be able to access. The government’s decision not to proceed with an extraordinary tax on banks’ profits, in order to avoid creating investment turmoil, makes the need to find a solution for all the aforementioned issues in agreement with the country’s credit institutions more urgent.

Interest Rates and Spreads

Our country has some of the lowest deposit interest rates, while it is relatively close to the EU average in terms of lending rates. This factor leads to very high interest rate margins (the difference between deposit and lending rates). This is largely why the banks maintain such high results despite the decline in interest rates.

In October 2024, the average weighted interest rate for new deposits in our country remained almost unchanged at 0.53%, while the corresponding rate for new loans decreased to 5.41%. The interest rate margin between new deposits and loans decreased to 4.88 percentage points, though it remains extremely high.

Zero Returns on Savings Accounts

It is noteworthy that despite initial bank estimates that 35% of total deposits would become term deposits, 20% of total deposits remain in savings accounts with almost zero returns.

What happens with savings deposits is characteristic: the EU average return on savings and current accounts for individuals is 0.36%, while the corresponding deposits in our country have a return of 0.03%. Our country is thus claiming the sad distinction of having some of the lowest returns, as even Malta and Slovakia, with returns of 0.08%, are higher than Greece.

France is very low at 0.06%, in contrast to Germany at 0.57% and Luxembourg at 1.38%. This creates the basis for the chaotic difference between deposit and lending rates in our country.

Cost of Mortgage Loans

Regarding mortgage loans, the average interest rate on mortgage loans, according to ECB data for October, on a monthly and variable basis, is 3.55% for EU countries. For our country, it stands at 3.79%, for Cyprus at 4.42%, and for Estonia at 5%.

According to data from the Bank of Greece, the average interest rate on existing mortgage loan balances with a term of more than 5 years remained almost unchanged at 4.28%, according to October data.

Cost of Business Credit

For business loans, ECB data reports an average interest rate for October (monthly and variable basis) at 4.68%, which for Greece rises to 5.18%, while for Italy it is 4.85%.

The average interest rate on business loans with a term of more than 5 years decreased by 17 basis points in October and stood at 5.62%, according to the Bank of Greece. The corresponding interest rate for professional loans decreased by 12 basis points and stood at 6.50%.

Another factor that seems to be of great concern to the government and small businesses in the country is the lack of funding for them. Any loans provided to small and medium-sized businesses – no official data is available – either carry state guarantees or are subsidized by the Greek government.

However, if banks can provide loans to small and medium-sized businesses even with subsidies, deeming them creditworthy, why can’t they open credit lines for them without the subsidy or guarantee? The truth is that small and medium-sized enterprises have been sidelined in the banking system in the previous period. This happened for a number of reasons, the most important of which are:

The need for banks to reduce the risk of lending to avoid creating new non-performing loans.
The increase in interest rates, which led small businesses out of the banking system.
The difficulty for banks to assess the financial data of small businesses due to limited financial records and their unclear tax footprint.

Up to 50% Reduction in Bank Fees – What Mitsotakis Will Announce in Parliament

All three reasons have disappeared, and tax transparency will lead to a much richer record of small businesses’ data. Therefore, the pressure to open the credit taps for small and medium-sized businesses is becoming stronger. Regarding mortgage loans, the housing problem is very complicated.

Banks argue that credit expansion is negative not because they are unwilling to lend, but because they lend based on the limited demand they have, which is due to rising interest rates and low wages, making loans unaffordable for many households.

However, it seems that they are discussing with the State the possibility of bypassing procedures in selling properties from their portfolios, such as regularizations, in order to facilitate the sale of these properties to private individuals. At the same time, the State has developed programs that will boost housing demand, such as the “My House 2” program, which subsidizes loans for property purchases.

Problematic Service

The reduction in bank branches is dramatic, especially in rural areas. In cities, banks have also been reduced, and the branches primarily operate in a consultative capacity.

There is no free access without an appointment at bank branches.

Perhaps only some smaller banks slightly violate this strict protocol inherited from the COVID period.

It takes from three to eight days to schedule an appointment with a bank, and even in this case, banks often require business matters to be handled electronically and only.

In rural villages, in many cases, residents need to travel several kilometers to access an ATM, where they cannot be fully served and pay high fees.

It seems to be misunderstood that a large part of the population has lost contact with its assets due to the inability to manage information systems, and at the same time, visits to the branch for information or minor tasks are no longer feasible.

Often, a depositor is cut off from their bank account for days if they fail to update their details electronically without any real reason for doing so, mainly because the “Know Your Customer” directive has been strictly implemented with Law 4816/2021.

Elderly people lose access to their accounts, and it takes many days to contact the branch so that a bank employee can resolve the issue. It is worth noting that “THEMA” raised the issue at a recent special event of the Hellenic Bank Association, only to be told that each person’s problems with their bank should be solved by themselves, which, in free translation, means that such issues do not concern the Association.

Abroad

Meanwhile, abroad – especially in European countries – the appointment system exists, but meetings are scheduled easily, quickly, and cover all banking operations. Operations carried out via platforms can always be done in person, and partly this is due to the large number of banks that exist, creating healthy competition.

The corresponding EU directives are applied with different gradation to individuals and businesses, depending on their size, income level, and deposit volume. A characteristic example is Cyprus, which charges differently for in-branch visits and for electronic service, while also offering the possibility of access to its bank branches. At the same time, it creates more affordable pricing for young people and the elderly, offering a fair approach to social justice.

Traditional Banking

All of the above lead to the safe conclusion that now that banks have been cleaned up and now have a solid capital base and high profits, which provide dividends to their shareholders and plan their development, they must also address their customer base and implement a new design, and certainly, more attention to traditional banking operations.