Optimistic about the course of the banking system in Greece as, as he said, it was transformed and endured during the crisis, the chairman of the board of directors of the National Bank, Gikas Hardouvelis, appeared at the conference organized for the second year by the Institute of Internal Auditors.

“Today the problems of the past have been resolved. Greek systemic banks operate with optimal corporate governance rules. They are pioneers in ESG issues and among the best employers” stated Mr. Hardouvelis, estimating that their course also depends on the course of the economy, for which he emphasized that it has found its pace.

Answering the crucial question “what will be the course of the banking system 5-10 years ahead?» Mr. Hardouvelis noted that the future course of banks is a function of:

• the course of interest rates

• the stability of the financial system

• the evolution of technology, i.e. accelerated digitization, artificial intelligence, and intense competition especially in retail banking from companies in the sector, fintech and Big tech

• the competence, managerial ability and ambition of the executives in the banking industry, the proper internal governance of the banks as well as the adequate operation of the 3 lines of defense in the banks

• the course of the economy:

“Banks and the economy are an inseparable duo, which influence each other either positively or negatively” continued the chairman of the board of the National Bank, stressing that the economy is also affected by third factors, such as, among others, the increase in the economically active population, productivity of workers, income distribution as well as competitiveness and structural reforms. Also from the country’s external environment, i.e. the freedom of international trade and movement of capital, the framework of economic and political relations with other countries of the planet, global demographics and the movement of populations, the environment and net zero goals on the planet and the distribution income between countries.

“The previous decade with very low, zero and even negative interest rates was a parenthesis, which will not be repeated soon” argued Mr. Hardouvelis, explaining that the market sees a decrease in inflation and interest rates but these are expected to end up at higher levels than those that applied 2-3 years earlier.

Afterwards, Mr. Hardouvelis mentioned that the traditional way of making profits for banks from the difference in interest rates on loans and deposits came back to the fore.

“Fixed profitability increased last year and this year across the board. Same in Greece. Internationally, only banks that in the recent past defied interest rate risk and bought long-term bonds with a fixed and low interest rate, or made long-term loans with a fixed and low interest rate, suffered losses. This was the main cause of the collapse of Silicon Valley Bank,” he said verbatim, and highlighted as the dominant issue of the day “the dilemma between inflation targeting and financial stability.”

Referring to the recent turmoil in the American banking system and answering whether we should be worried in Europe, Mr. Hardouvelis replied:

“In Europe, the view of the ECB that the banking system is shielded with high capital adequacy and that the ECB itself has the tools beyond the interest rate to maintain the stability of the banking system, I think is correct. On the contrary, in the US there is a questionable and serious dilemma whether interest rates should be increased further. There, the supervisory framework, especially of small and medium-sized banks, has been relaxed since the era of President Trump, and interest rate increases work destabilizingly.

Referring to the new era of digitization and electronic transactions and the entry of digital banks, he said: “banks are leading the way in digitization and are not going to be displaced by their competitors in retail banking.”

Speaking about the second risk faced by banks, decentralized finance, finance without banks, where each user is connected alone to the other users (DeFi = Decentralized Finance), Mr. Hardouvelis emphasized:

“In the current architecture of the financial system there is transparency. In the world of DeFi there is opacity and a lack of governance rules. I don’t see it having a future. Even if it temporarily grows, the supervisors and governments will not let it work.”

Intervening in the debate that has opened worldwide on whether the development of artificial intelligence is a risk, if e.g. is ChatGPT a risk, Mr. Hardouvelis responded negatively and explained: “We have to embrace technology and tame it. Let’s not have phobic syndromes towards her”.

The Chairman of the Board of Directors of the National Bank noted that Artificial Intelligence will certainly change a lot in our daily lives, he predicted that there will be a strong problem of trust in what we see as an image and what we hear and he argued that banks can play an important role and find a wide field of work as guarantors of reality.

Finally, referring to the organizers of the conference and the future of the subject of internal control as well as the other “lines of defense” in banks, he argued: “We are entering an era with greater access to data from all lines of defense in banks and, therefore, with greater transparency. The front line will be able to do its job more easily. A common technological platform with common data, to which all lines will have access, seems to be coming,” continued Mr. Hardouvelis and concluded: “Is there perhaps fatigue from constant checks? This might be the Mega-threat of space”.