In 2010, renowned historian Niall Ferguson published his biography of Sigmund Warburg (“The Ultimate Financier; The Life and Times of Sigmund Warburg”). This is a massive volume highlighting the personality of a banker with a strong moral imprint who was active in the post-war City of London, helping to revive it as an international financial centre.

The social and economic challenges posed by successive crises have brought the role of banks back to the center of the public debate. Meetings of the Minister of Finance with the management of the banks took place recently, and Mr. Stykoura asked the latter to “be on top” (11/27/2022) and show a more sociable face.

In this regard, the diversity of challenges faced by lending institutions is notable, and they include both those related to the current economic climate and other structural issues. Thus, the sources of concern are, among other things, strong inflationary pressure and the subsequent increase in interest rates, the expected slowdown in economic activity, as well as an increase in the cost of credit risk. In addition, however, the cost of financing businesses in Greece has consistently been clearly higher than in the Eurozone, with a large degree of opacity and uncertainty characterizing the financial position of businesses, the vast majority of which are small to very small (Hardouvelis). , Magginas, DiaNEOsis, 2022).

Thus, the main objectives of banks are as follows:

First, a further reduction in non-performing loans (NPLs): while the single-digit NPL operating target has been met for the systemically important banks, further reductions are imperative, especially given the comparison with the relevant European average and the expected new wave. non-performing loans. A related long-term goal is clearly to strengthen capital adequacy, with the poor quality of regulatory capital a concern (Monetary Policy, Bank of Greece, December 2022, p. 122).

Secondly, the faithful adherence to the principles, practices and criteria of corporate governance, transparency, accountability and ESG (environment, social responsibility, governance): lending institutions must follow a corporate governance system that will regulate their activities, organization and management, including parallel to its operating model the logic of sustainability (ESG factors and risks) and placing environmental and social parameters at the forefront of its activities and strategy.

Third, improving organic profitability: Improving bank profitability will be a challenge as, among other things, the ECB’s hike in key interest rates as part of monetary policy normalization is expected to put pressure on businesses and households, leading to higher costs. banks’ credit risk.

Fourth, increase bank financing: The role of banks in channeling Recovery and Sustainability Fund resources is certainly critical and must be played in the challenging environment of rising interest rates and declining nominal GDP growth.

Fifth, the digital modernization of the services provided and, as a result, the continuous training of staff and the development of their skills: the ability of banks to provide their customers with the opportunity to make transactions and use innovative products without space or time restrictions and with conditions of absolute security is one of the ways and a priority .

In this context, and in the context of an unprecedented “multi-crisis”, when one crisis follows another (economic, medical, moral, geopolitical), without interruptions between periods of calm, can additional social and moral parameters be taken into account in the performance of the bank’s tasks?

The answer is yes. Drawing on the example of Warburg, the German banker remained committed throughout the time to the ideal of “high banking” (haute banque) as he developed it, focusing on inculcating more honesty in banking. In fact, according to Warburg, the adoption of high ethical standards in bank practices was even more important than financial success (pp. 233, 240). In this light, banks “should” support society in the current difficult situation.

However, there are limitations to the above position, and they are established by a deep understanding of the structure within which lending institutions act as intermediaries. This distinction requires the “financial literacy” of society (Gortsos, Eurobank 1989-2008, p. 350). In fact, this is a timeless request: “The banker used to be characterized as a person who borrows his raincoat in fine weather and asks for it back as soon as the first drops of rain begin to fall … (however) the parallel is completely out of line with things … the public, according to seems to have been informed by appropriate education that … the banker’s sacred duty is to protect the public’s deposits…” (Stamou, Banking Administration, 1970), p. 86).

In conclusion, the adoption by banks of a renewed culture of “high banking”, which will include general legal and ethical principles requiring social intervention, perhaps in addition to the already existing ESG criteria, is welcomed, especially in “numerous countries”. crisis situation. Of course, it is necessary to take into account the complex specialization of these bodies, the complex relationship between the state and banks, and the limitations inevitably imposed by the main economic role of institutions and the wider financial environment. Moreover, the reality of a “multi-crisis” requires more than ever the integration of macroeconomic, social, environmental, social and global health data (Wolf, Financial Times, 11/29/2022). The financial literacy of society will allow the political and economic elite to actually create a modern credit system necessary for a strong economy and society.

Mr. Alkis Mirkos is a Partner at Deloitte Law Firm (KBVL Law Firm), Head of Banking and Finance and Visiting Fellow at the University of Oxford.