Greece's bust banks need better oversight from their Troika saviours. The European Commission, European Central Bank and International Monetary Fund provided €18-billion ($23.2-billion) earlier this year to repair Greek lenders' battered balance sheets. But they are in danger of forgetting to keep tabs over what happens next.
The entity tasked with overseeing the Greek government's stakes, the Hellenic Financial Stability Fund (HFSF), will have a five-member "general council." Two of these are appointees of the Bank of Greece and the Greek Ministry of Finance, two will be bankers with "international experience," and the final member is likely to be a non-banker. That means all could be Greek. So could the HFSF's three-man executive team.
The Troika has built in some safeguards. It has to approve three of the five members on the general council, and the European Commission and ECB have been monitoring the selection committee for HFSF staff and will send observers to future general council meetings. But it has no formal veto over what the HFSF does.
For the lenders, that looks unwise. Greek corporate governance ranks well below global averages on issues like creditor protection and information transparency, according to the World Bank's Doing Business Report, and it scores poorly in euro zone-wide surveys of the control of corruption. Since state-run pension funds control National Bank of Greece, the country's biggest lender by assets, the bank's senior management tend to change every time there is a new government. That fact was explicitly acknowledged as a business risk in its 2008 annual report. Reuters has also reported financial scandals at Piraeus and Proton Bank. At the very least, the euro zone authorities should push for a veto on HFSF decisions.
For the Greeks, foreign influence is politically sensitive. There is great resentment of the outsiders who are imposing a painful austerity in return for the funds which keep Greece from defaulting. But the government is already being urged to appoint external monitors to oversee tax collection. It should be willing to accept closer scrutiny of the body that will run Greece's banks as well.