Rhein on Energy and Climate

Insignificant news may sometimes look shocking. The announcement by the Bank of Greece that it will pay € 100 million dividend for 2011 is one of those news; it is not surprising that it has made headlines in German TV and newspapers.

How should owners of Greek State bonds who had just been forced to renounce two thirds of their claims appreciate such a news! They bail out a country that still can pay its central bank shareholders a dividend!

At first sight it is a scandal! At second sight it is much less so. Indeed, most of the dividend payments flow into the Greek Treasury, the State being the biggest shareholder. Only € 13 million go to private shareholders.

This being said, the news raises three questions:

  • Should European central banks which have transferred most of their traditional powers to the ECB maintain the status of private corporations whose shares are quoted at the stock exchange like those of commercial banks?

The answer should a priori be negative, even if some central banks have a long history, the Greek bank having been founded back in 1927.

  • Was the Greek Central Bank right to pay dividends considering the volume of risky loans to the shaky Greek banking sector?

The answer should also be negative. The 2011 profit should rather be used to reinforce the reserves.

  • Is the Greek Central Bank with 3000 employees compared to 9.000 in the Bundesbank not over-staffed?

That seems to be the case even if the Greek Central Bank assumes oversight functions in the insurance sector that no longer befit national central banks.

This leads to one policy conclusion: After more than a decade since the creation of the Europa Central Banking System the ECB should introduce a stricter controls over its 27 affiliate banks, which should progressively harmonise their opus moderandi.

Whatever alleviating factors, the Greek Central Bank has failed to show sensitivity when deciding to pay dividends to its shareholders less than one month after the country narrowly escaped insolvency.


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  1. Dear Mr Rhein,

    First of all, let me command you on the good quality of your posts and articles. My knowledge of latin being limited at best, I may be wrong in suggesting the following, but did you not intend to write ‘modus operandi’ in your second last paragraph?

    Best regards

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