REFILE-INSIGHT-Greek central banker's big pay-off


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By Stephen Grey and Nikolas Leontopoulos

Athens, Oct 11 (Reuters) - The governor of the Bank ofGreece was given a severance payment of 3.4 million euros whenhe left his former employer, a major bank that he now regulates,documents seen by Reuters show.

George Provopoulos was awarded the sum when he stepped downas vice-chairman of Piraeus Bank to become governor of Greece'scentral bank and a member of the board of the European CentralBank in 2008. The scale of the pay-off, previously unknown tomost Greeks, is likely to prove controversial, amounting tonearly 2.8 million euros ($3.6 million) after tax.

As governor of the central bank, Provopoulos, now 62, hasplayed a key role in propping up Greece's banking system, whichhas received billions of euros in liquidity from the ECB and isin line for up to 50 billion euros of new capital from thebailout provided by euro zone countries and the InternationalMonetary Fund.

The Greek central bank has also faced criticism over therecent rescue of the country's troubled state-run AgriculturalBank (ATE), which left-wing Greek MPs described as the "robberyof the century." In that deal the authorities decided to placeATE's non-performing loans into a 'bad bank' and hand the restof ATE to Piraeus.

The Bank of Greece said Provopoulos faced no conflict ofinterest from his severance deal and had fully informed theauthorities of the payment. When Reuters sent questions toProvopoulos, the Bank of Greece legal department responded: "Incompliance with the applicable Greek law, Governor Provopoulosdeclared the severance payment to all pertinent tax and judicialauthorities."

In a letter to Reuters, Dr Vassilios Kotsovilis, the bank'slegal director, added: "The severance payment, having beenagreed upon at an earlier time and under very different(pre-crisis) circumstances, was neither of an arbitrary naturenor of an extra-ordinary nature."

Kotsovilis said details of the payment were reported in "thepress and blogs of the period." However, Reuters was unable tofind mention of the payment despite extensive searches in bothGreek and English.

Piraeus, which is suing Reuters over a previous report aboutthe bank, said in a statement: "In view of legal proceedings...we consider it inappropriate to comment in any detail."

It added: "It goes without saying that Piraeus Bank hasalways fully complied with the rules and regulations governingthe Greek banking sector."


Provopoulos, a former chief executive at Emporiki Bank,Greece's fifth largest bank, joined Piraeus, the fourth largest,on Oct. 18, 2006. As a vice-chairman and managing director, hewas entitled to a net salary of 580,000 euros, plus expenses anda bonus.

On May 22, 2008 he resigned from Piraeus after 19 monthsservice. Documents seen by Reuters indicate that, on the daybefore he left the bank, its directors approved a severancepayment of 2,775,000 euros, in addition to his pay of 325,704euros for five months work that year.

The Bank of Greece confirmed the severance payment was 3.46million euros before tax and was paid to Provopoulos that month.It amounted to more than two million euros per year of service.

Almost a year later the deal appeared in minutes of aPiraeus shareholder meeting held on April 30, 2009, which soughtretrospective approval for the payment. Though such shareholdermeetings are open to the press, the payment appears to havepassed unnoticed.

Louka Katseli, a former Greek Economy Minister and nowprofessor of Economics at the University of Athens, was one ofthose unaware of the payment, despite being a prominentopposition politician at the time. When told of the payment thisweek, she said: "I had no prior knowledge of Mr. Provopoulos'sseverance."

George Gougoulis, the president of ESETP, a staff unionwithin Piraeus Bank, was also unaware of the pay-off toProvopoulos. "We have repeatedly asked the Bank to disclose tous information about the way top executives and members of theBoard are remunerated, for instance by stock options, and theyhave always refused that," he said.

The scale of Provopoulos' payment is notable when setagainst what minutes of shareholder meetings record for paymentsto other directors who have departed Piraeus. Anothervice-chairman, Theodoros Pantalakis, was on a similar level ofremuneration at Piraeus to Provopoulos and left in December 2009after working for the bank since 2004. He was given a pay-off of470,000 euros, according to shareholder minutes, amounting toless than 100,000 euros per year of service.

By comparison, Provopoulos' pay-off was three times hisafter-tax annual compensation, according to the Bank of Greece.

Pantalakis told Reuters that any payments to him were "asrecorded in minutes of shareholder meetings." His severancepayment may have been lower because of the worsening creditcrunch at the time of his departure. He said of the payment toProvopoulos: "I don't find it peculiar, I don't have anyrecollection that something was out of line."

Michalis Colakides, another former vice chairman and deputychief executive of Piraeus, left the bank in 2007 after sevenyears of service. Piraeus accounts record no severance pay forColakides that year, though Colakides told Reuters that hereceived a payment equal to two years salary. He declined tocomment further.

A spokesman for Piraeus said: "The remuneration of PiraeusBank's senior management has been established and duly approvedby all the relevant corporate committees and bodies, in fullcompliance with all applicable internal and external regulationsand duly recorded as such in the Bank's financial statement."

In response to Reuters inquiries about Provopoulos'financial arrangements with Piraeus, the Bank of Greece saidthat "detailed answers have been given to the Greek parliament",and other relevant authorities.

The issue arose in parliament in 2009 because rumours hadbeen circulating in banking and political circles about a largeinvestment loss suffered by Provopoulos a few months after heleft Piraeus.

In September 2007 he and other senior executives of Piraeushad taken out loans from the bank to buy shares in a rightsissue it was staging. According to one former Piraeus manager,all senior figures at the bank were asked to take part when thebank's then executive chairman, Michael Sallas, announced hewould raise 1.35 billion euros by issuing approximately 67m newshares.

"Everyone got a letter that said something like: 'Here isyour allocation of shares. Your loan is pre-approved. Signhere!'" said the former manager.

Bank of Greece rules allow banks to finance theparticipation of employees in rights issues. Piraeus declined tocomment on the rights issue and the loans because of legalproceedings against Reuters.

In May, Piraeus announced it was suing Reuters over anearlier report about the bank renting properties owned bycompanies run by Sallas and his family. The bank is claiming 50million euros in damages. Reuters stands by the accuracy of itsreport.


According to stock exchange records, on Sept. 17, 2007Provopoulos bought 212,911 shares in Piraeus, having purchasedthe rights to participate in the offer a week earlier. To coverthe cost Provopoulos took a loan from Piraeus for 5,024,812euros, according to his own later declarations.

He bought another 23,250 shares on December 28, 2007, undera share option scheme.

After leaving Piraeus, Provopoulos held onto his shares forthree months while he was governor of the central bankoverseeing the banking system. He had informed legal advisersand been told that "the ownership of the portfolio didnot...influence in any way the legality of his duties", hisoffice later told parliament.

Provopoulos sold the shares in October 2008 after thecollapse of Lehmann Brothers sent bank shares plunging. Herealised 2,449,256 euros - far less than his outstanding loan toPiraeus.

Speculation about Provopoulos' debt to his former employerprompted Michael Karhimakis, then a Pasok MP, to ask questionsin the Greek parliament. Provopoulos responded with a formalstatement from the director of his office.

It said he had suffered an "important loss" on his Piraeusshares and repaid his loan to the bank with the proceeds of theshare sale plus a personal cheque for 2.1 million euros. Thestatement to parliament made no reference to the fact thatProvopoulos had been granted a severance payment of 3.4 millioneuros by Piraeus.

There was no legal obligation for Provopoulos to declare hisseverance payment in parliament and the Bank of Greece said itwas not mentioned "due to the fact that the then-asking MPconfined his questions to the sale of the shares of Piraeus."

But Karhimakis, the former Pasok MP, told Reuters that, inhis opinion, Provopoulos had a moral duty to disclose thepayment and make clear his assets and their source. "This is aperiod when transparency for public figures is needed more thanever," he said.

Provopoulos' salary as governor of the central bank is notpublished. But the Bank of Greece told Reuters his salary is 50per cent lower than it was when he took office, after he hadaccepted two pay cuts during the country's austerity drive.Provopoulos now receives an after-tax 'monthly' salary of 7,615euros paid, as for many Greek public officials, 14 times a year,said the central bank.

In August, Provopoulos defended Piraeus's takeover of ATE inthe Greek parliament. When lawmakers questioned him aboutReuters reports involving Sallas, Provopoulos was dismissive. Hesaid the reports referred "to isolated incidents, implicationsthat are presented as facts and selected parts of statements byexperts and non-experts to arrive at an arbitrary conclusion inmy opinion - that the Greek banking system is suffering from badcorporate governance and inadequate regulation."

If this were true, Provopoulos said, "then today there wouldno banks left standing."

(Reporting By Stephen Grey and Nikolas Leontopoulos; Editing byRichard Woods and Simon Robinson)



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