A Wily Banker Reaches the Top in Greece

But now that he’s managed to turn his bank into Greece’s largest, insuring that Piraeus will be eligible for a bailout from the European Union, Mr. Sallas runs the risk that some of the steps he has taken along the way may come back to haunt him. Those moves include borrowing over 100 million euros (about $135 million) from a friendly banker in a bid to prop up the falling shares of his own bank and making risky loans to people and entities with ties to Piraeus.

Europe is preparing to close the books on perhaps the most ambitious aspect of its plan to keep Greece afloat — a cash injection of about 50 billion euros into the country’s four largest banks.

And bank governance has emerged as a critical issue, with the country’s creditors — who arrived in Athens this week to carry out their latest audit — insisting that continued aid is conditional on banks demonstrating that their conduct is above reproach.

Still, Greece’s overseers from the European Union and the International Monetary Fund may well find that even with increased oversight, changing the freewheeling business culture that long defined the Greek financial system will be easier said than done.

The rapid rise of Mr. Sallas exemplifies that culture. A tough, charismatic banker who seized control of Piraeus in 1991 and built it up by dint of more than 15 mergers and acquisitions, Mr. Sallas reached the pinnacle of the Greek banking world in March when he capitalized on Cyprus’s banking disaster, buying the Greek units of that island’s three biggest financial institutions, Bank of Cyprus, Laiki Bank and Hellenic Bank.

His supporters say that Mr. Sallas should be hailed for his entrepreneurial savvy and robust appetite for risk. Seeing an opportunity to reinvent his bank, he has merely stolen a march on his more sclerotic counterparts.

“He is someone who can really navigate the system in Greece,” said John Rigas, a Greek-American hedge fund operator and client of the bank who owns an Athens-based investment company in which Piraeus holds the largest share. “This bank has gone from a teetering No. 4 to a solid No. 1 in just a year.”

But others say that Mr. Sallas has pushed the boundaries of proper banking too far and that his maneuvering in the murky world of Greek finance — where the interests of bankers, the media and politicians often commingle — should be more closely scrutinized.

“Piraeus has long used problematic methods that call for investigation,” said Costas Lapavitsas, a political economist at the University of London who follows banking and politics in Greece. “What concerns me is that Piraeus has emerged as the leading bank in Greece not because it improved these methods. The old regime is just adapting to the new conditions and for me that is a sign of sickness and not health.”

Anthimos Thomopoulos, deputy chief executive of the bank, said all aspects of Piraeus’s business “have been exhaustively examined by independent auditors and regulators, inside and outside Greece, with no adverse findings.”

A trained economist, Mr. Sallas, who is 62, made his first career strides working under Andreas Papandreou, the Socialist premier who led Greece in the 1980s. In the years since taking over Piraeus his influence has continued to expand. He is close to the governor of the central bank, George Provopoulos, who until 2008 was vice chairman at Piraeus. And the bank is one of the largest advertisers in the Greek media.

Altogether, European governments and the International Monetary Fund have staked about 200 billion euros of taxpayer money on keeping Greece in the euro zone and eventually restoring its economy to health. To justify this commitment, Europe has subjected Greece’s largest banks to a root-and-branch investigation, focusing in particular on related party lending, or loans to entities in which the bank may have a financial interest, and has concluded that they have finally cleaned up their acts.

With regard to Piraeus, however, this assessment clashes with the conclusions reached by a team of auditors at Laiki Bank in Cyprus, one of the banks whose Greek unit Piraeus acquired in March.

Article source: http://www.nytimes.com/2013/06/11/business/global/a-wily-banker-reaches-the-top-in-greece.html?partner=rss&emc=rss