Ten Piraeus executives resign following discounted loan sale

Ten senior executives at Piraeus Bank, the biggest Greek lender, have resigned following alleged irregularities in the sale of a €1.2bn loan package at a deep discount to Libra Group, a family-owned conglomerate based in New York.

Libra paid €300m for the loan package in 2014 after borrowing €200m from Piraeus to finance the transaction, according to three people with knowledge of the deal. The 10 executives resigned separately between July and September.

The loan package acquired by Libra included non-performing Greek shipping loans with a book value of €1.1bn, renewable energy loans amounting to €80m and, €30m of personal loans held by the 10 Piraeus executives.

Some loans were allegedly transferred by Piraeus Bank to offshore companies in Cyprus and the British Virgin Islands in violation of capital controls imposed in mid-2015 during a bank run prompted by fears that Greece was about to crash out of the euro, the same people said.

Some of the non-performing shipping loans, which belonged to Marfin, a struggling Piraeus financial subsidiary, were later sold at a 50 per cent discount to the original borrowers, they said.

An Athens anti-corruption prosecutor is examining an auditors’ report on the deal carried out by the Greek central bank. The prosecutor is scrutinising whether any fraud and money-laundering have been committed, a judicial official said, adding that potential offences being probed include “conspiracy to defraud the bank, conspiracy to defraud the Greek state [a big shareholder] and money laundering through the violation of capital controls and use of offshore companies”.

The bank made no official announcement of the resignations. The 10 executives denied wrongdoing and received a normal compensation package from the bank upon leaving, according to a person with knowledge of the process.

Christos Megalou, Piraeus chief executive, who was appointed earlier this year with a brief to restructure the bank and improve governance, said the loan package had been fully provisioned in the bank’s 2016 accounts.

“The recent findings in the Bank of Greece audit while embarrassing, do not commercially impact the bank. The past breaches of the regulatory framework are ringfenced, have been provisioned for and have been adequately reflected in the bank’s financial statements,” Mr Megalou said.

A spokesman for Libra denied wrongdoing.

Libra, which is controlled by the Logothetis family, is a leading shareholder in Piraeus. Its other interests include shipping, hotels and renewable energy.

The Libra spokesman said: “We have an excellent relationship with Piraeus Bank and are working in close collaboration with the current management team, in whom we have great faith. As part of our major investment in Greece, we have substantial and performing borrowings with the bank.”