What Are Italians Looking For in Greek Banks?

Undoubtedly, for all the reasons cited and documented by numerous economic analysts over the past period, the expansion of Italian Unicredit’s presence in Greece’s banking system is a significant event. This development undoubtedly rests on the remarkable improvement of Greek banks’ balance sheets and their prospects within the broader European banking landscape. A closer examination of this event could reveal characteristics tied to important trends in the Eurosystem. These trends are likely to unfold further through similar developments in the Greek banking sector unless the European banking environment is disrupted by institutional or other interventions. Let’s delve into the events before the recent shareholding changes at Alpha Bank. Unicredit, or its more Italian name Unicredito, has been frequently mentioned in European banking reports due to its well-known dispute with Berlin, whose government—both previous and current—has stood as an obstacle to its expansion via entry into Commerzbank’s share capital. Less known but certainly not unknown in the banking world is that Unicredito has long sought to acquire Banco BPM, an Italian bank akin to Germany’s Commerzbank and holding a crucial position in Italy’s banking system. Both the Italian and German public sectors have placed obstacles in the way of this acquisition desired by Unicredito. The arguments used by both Berlin and Rome are strikingly similar. Both governments argue that the two banks targeted by Unicredito constitute key parts of banking systems that hold significant portions of national savings. Additionally, both banks—Commerzbank and Banco BPM—are linked to the primary funding of Small and Medium Enterprises in their respective countries, connecting them to a critical component of their economic structures. Why is it considered ‘bad’ for these reasons that they end up with Unicredito? Because this giant of Italian and European banking is primarily focused on portfolio investments and international financial markets. Simply put, the governments of both countries do not want to see their nations’ ‘cheap’ domestic savings flow into private financial markets with which the Italian colossus mainly engages. In this context, another element of interest may explain why Rome and Berlin are paying close attention to Unicredit’s expansion strategies. The ECB, as recently revealed—and the Single Supervisory Mechanism is certainly aware—has moved swiftly (members of its oversight team have already visited SoGen) to investigate how risky it is for the stability of the European banking system that large European investment banks have significantly increased their lending to private equity and funds. Through these entities, they enjoy much higher returns on their investment capital than those related to direct economic financing (loans to businesses, households, etc.). The risk highlighted by ECB inspectors is that while banks are under the ECB’s supervisory control, the private equity and various funds receiving loans from banks operate without substantial oversight. Consequently, the capital banks use to finance these financial entities may yield more, but it remains largely uncontrolled. And the risks associated with them, when realized, will impact the banks and the security of the committed capital… Ultimately, the ‘cheap’ savings money of Berlin and Rome does not want to leave the banking system and direct economic activity financing, ending up exposed to risks tied to segments of the financial market not supervised by the ECB.