Dispute over sale of General Bank

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In January 2004, the sale of a majority shareholding in Greece's General Bank to Société Générale of France resulted in intense disagreement, both between the employees' trade union and the management of the bank, and between the political opposition and the government.

Greece's General Bank was founded in 1937. At present it has 102 branches and 145 ATMs throughout Greece and employs a workforce of 2,052. Its principal shareholder is currently the Greek Army Fund (MTS), which owns around 38% of the total share capital. Another 6% belongs to the bank employees’ supplementary social insurance fund and various other parties hold the remaining 55%. The management of MTS is appointed by the Minister of National Defence. This indicates that the objectives and goals of government policy may indirectly influence the decision-making process over the future of General Bank, although this is not necessarily the case.

It has been decided to sell the majority share package in General Bank. This has been done through two open tenders, with the involvement of an international investment advisor. The French-owned Société Générale was one of three banks that took part in the first tender. In the second tender, the investment advisor and MTS management selected Société Générale’s bid as being the most viable and in the best interests of the bank’s future. Société Générale had withdrawn from the first tender because no provision was made for turning over the management of the bank to the successful bidder. This indicates the strong desire of the French-based financial group to assume full control of management of the bank, rather than merely receiving a dividend from the shares it owns.

The agreement to sell to Société Générale has now been made official. A press release issued by MTS on 19 January 2004 stated: 'The board of directors of MTS at its meeting today has declared Société Générale SA to be the strategic investor, following the negotiations carried out and the improvement it has made to its bid. Whereupon Société Générale SA will be called upon immediately to sign the relevant contracts.' Furthermore, a statement by the management of General Bank on 22 January said that 'the agreement between the MTS and Société Générale has been finalised and we are now entering its implementation stage, through decisions by the' bank’s board of directors and general meeting. However, there have been many protests and disagreements over the manner and procedure of concluding the sale agreement.

Protests

The General Bank employees’ trade union has expressed strong disagreement with the incipient sale of the bank, claiming that it fails to ensure the company’s future and independent course of development, and that it jeopardises the labour and social insurance rights of the employees as well as their job security. This disagreement continued and intensified when the proposed form of the bank sale was finally announced and Société Générale was named as the strategic investor. The basic reason for this was that the legitimacy of the sale of part of the share capital held by the MTS was called into question, since in the view of the trade union the sale price to Société Générale is particularly low. At the same time, the union stated that the French banking group had initially provided no meaningful commitment to refrain from carrying out redundancies or collective early retirement schemes, and that it had also managed to disengage itself from its obligations to the General Bank staff friendly society. The union claimed that Société Générale had referred to about 500-600 dismissals in its initial bid. However, these will now be avoided following a commitment made by the group not to dismiss any staff. Nevertheless the workforce may still be reduced - by 300 people in a first stage - through a voluntary retirement scheme after the Société Générale group has assumed management of the bank.

The General Bank employees' union is also of the opinion that this change in ownership of the bank will be prejudicial to MTS itself, as well as to small shareholders and to the national economy. It also stresses possible negative effects of the sale on the financial situation of the employees’ friendly society, due either to a loss of employees’ contributions, or to a need to pay lump sums and pensions to employees who are made redundant or forced to take early retirement. In addition, the union’s concern has heightened following reports in the international press that the Société Générale group recently carried out dismissals at a bank in the Czech Republic, and that the company’s corporate restructuring programme for 2004 includes a reduction in the number of staff by 1,000 across Europe.

Prior to the sale, the General Bank employees’ union held repeated strikes and protest meetings and called on the political parties, the competent ministries (the Ministry of National Economy and the Ministry of Defence) and the governor of the Bank of Greece to intervene in order to put an immediate stop to the procedure to sell the bank. In mid-January 2004, the union resolved to file a complaint against everyone responsible for the MTS decision to sign a contract of sale of General Bank shares to Société Générale. On the political level, the leader of the opposition stated on 12 January that when the forthcoming general elections are over he will not, if in government, recognise any of the many contracts signed in the run-up to the elections, especially that of General Bank.

According to a statement issued by the board of directors of General Bank on 22 January, the agreement on the sale of shares states the intention to keep the MTS as a basic shareholder with 10% of the shares, and also to maintain the present number of jobs. Furthermore, it states that the entry of the strategic investor into General Bank is a positive event of paramount importance, since it helps boost the bank’s competitive position through an influx of capital from abroad, and through access to an expanded network and the quality of the services that Société Générale provides. Also deemed to be particularly positive for the growth of General Bank is the possibility that its activities will be enriched by the French bank in the areas in which it has successfully done business in recent years, and in particular in corporate and investment banking, and private banking.

Commentary

Deregulation of the financial system has provoked a variety of reactions from the Greek trade union movement and the various policy-makers in the banking market. Even though, from the unions’ perspective, what is still mainly hanging in the balance in mobilisations over the coming changes in ownership of banks is job security and the avoidance of worse working conditions, the basic question inherent in the current discussion is the operation of the banks on terms that obey some or all of the laws of the market. This discussion becomes even more complicated when non-private bodies and various state authorities are included in the ownership of the financial institutions or at least in the regulatory framework for their operation. The case of General Bank illustrates most graphically the absence of an unambiguous, collectively acceptable view of the framework in which the process of deregulating the domestic banking market will be conducted in the future. (Lefteris Kretsos, INE/GSEE)