Greece’s fiscal troubles seemed to grow deeper with the revelation that companies owned by Piraeus Bank’s chairman and his children took out secret loans from a rival bank to pay for Piraeus shares.
Elsewhere in the eurozone, Germany’s Constitutional Court said that it would not issue rulings on the constitutionality of the permanent rescue mechanism and the fiscal compact until Sept. 12—more than two months after the rescue mechanism was set to begin functioning.
Reuters reported Monday that an audit of Piraeus Bank revealed loans amounting to more than 100 million euros ($121.9 million) were taken out by offshore companies owned by Michael Sallas, executive chairman of Piraeus Bank until last month and still its non-executive chairman, and his two children. The loans paid for shares in Piraeus Bank, Greece’s fourth largest, and were financed by another Greek bank.
The block of shares owned by the Sallas family constitutes more than 6%, which makes the family the largest shareholder in the bank. Greek and European law both require that any holding in a public company of more than 5% be publicly announced. In addition, Greek law requires all company executives “and persons closely associated with them” to make all their share transactions public.
However, Sallas reported only his own stock holdings, those held in his own name and those held in the name of his company, Shent Enterprises. He did not disclose the shares purchased by his children.
While auditors of the lending bank regard the Sallas family loans as “connected,” Kostas Botopoulos, chairman of Greece’s Capital Market Commission, which regulates the country’s public companies, said that choosing to define a “person closely associated” with another in such instances was “considered on an ad hoc basis.” He added that there is no specific ruling that automatically categorizes a spouse or children as a close association.
Piraeus Bank did not report the purchase of those shares to the Athens stock exchange. It has also issued a statement in which it says it will refuse to answer detailed questions sent by Reuters to the bank and to Sallas because of “civil and criminal cases” between the bank and the news agency. The bank has sued Reuters over an earlier news story in April about the renting of expensive properties by Piraeus from several private companies owned by the Sallases.
The greater part of the money borrowed by the Sallas-linked companies was used to buy shares in a January 2011 Piraeus Bank rights issue that was intended to bolster the bank’s capital base ahead of stress tests.