Lisa Gray

ContactLisa Gray has been a wealth writer since 2001. She has been involved in the wealth management industry since 1988. She is the author of two bestselling books—The New Family Office and Generational Wealth Management.
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graymatter Strategies LLC

An Audit Reveals Other Factors At Work Behind Greece's Breach Of European Union Member Guidelines edit
Monday, July 16, 2012 09:53

Tags: banks | debt | European zone | fraud

It appears from a recent audit that Greece has breached Eurozone mandates in other ways than just its debt to gross domestic product (GDP) ratio. Apparently, the head of Greece’s fourth largest bank, Piraeus bank, and his children took loans against the bank which were financed by another bank.

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The loans were used to purchase more shares of Piraeus bank, making Michael Sallas—former executive chairman of the bank and currently its non-executive chairman—a 6% shareholder. The European Union stipulates that any shareholder ownership of greater than a 5% stake be made public.
 
This applies to all closely associated shareholders, which would include the entire Sallas family since it jointly has become the bank’s largest shareholder. Yet the head of Greece’s Capital Market Commission claims there is no specific categorization that designates spouses and children as closely associated shareholders.
 
The Sallas family also did not report the transactions purchasing the shares to the Athens stock exchange. The family purchased rights to shares in January 2011 for the purpose of bolstering the bank’s ability to weather a stress test.
 
The fact that the shares were financed by another bank and secured by previously owned shares in Piraeus bank indicates the purchases may simply have been an effort to improve the balance sheet by moving money from one column to another.
 
Auditors of the funding bank said that funding the purchases was not in the bank’s best interests, that the investments had dire prospects, had no personal guarantees, and were made through an inappropriate vehicle.
 
The funding bank also neglected to subtract the loans from its balance sheet, a move that should have been monitored and detected by the Bank of Greece, which is the regulatory oversight body for Greece’s banking industry.

 

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