Code of Ethics for Bankers: Panacea for debtors or simple wish list;

The prolonged crisis in the country has "forced" the Bank of Greece (BoG) to regulate Banking - Loan Relations, which today confirm the need to make the most possible effort for the loan relationship to be kept in view of the adverse economic environment. Thus, pursuant to article 1 par. 2 and 4 of Law 4224/2013, as amended by article 12 of Law 4281/2014 and article 98 of Law 4389/2016, the Credit and Insurance Committee of the Bank of Greece, during the meeting no 195 / 29-7-2016  decided to revise the Code of Ethics for the management of non-performing loans for individuals and businesses, which entered into force initially on 31.12.2014 and has already been amended twice with corresponding decisions of the Credit and Insurance Committee Issues with no. 129/2 / 16.2.2015 (Government Gazette B '486 / 31.3.2015) and 148/10 / 5.10.2015 (Government Gazette B' 2219 / 15.10.2015). 


A basic obligation under the Code of Ethics is compliance with its procedures prior to any termination of the relevant credit agreement. The Code applies to any form of debt with a delay up to 60 calendar days against any credit institution applying the Code.

In particular, a borrower is cooperative with its creditors when: (i) he/she provides complete and up-to-date contact information to the lenders, (ii) he/she is available in contact with the lender and responds honestly and clearly to calls and letters of the above within 15 working days , (iii) he/she makes a full and honest disclosure of information to the institution regarding his/her current financial situation within 15 working days of the day of his/her change or from the day upon which he/she is requested  information by the above persons, (iv) he/she makes a full and frank disclosure of information that will have a material impact on his/her future financial position within 15 working days of becoming aware of them; and (v) he/she consents to investigating an alternative restructuring proposal as provided for in Code. 

The Delay Resolution Procedure (DRP) of the Code consists of five steps. In the first stage, the credit institution shall, inter alia, contact the principal and, if any, the guarantor, by sending a written notice informing, inter alia, about the details of the due date and their membership of the DRP. Also, they should receive the "Brochure to Borrowers with Financial Difficulties" and, if they are natural persons, the "Standardized Financial Statement" (TYKOP) or, if they are legal persons, the standard form of the Foundation for submitting information by legal entities. Finally, they have to complete the relevant form accurately and thoroughly and submit it to the institution so that they can then join the Stage 2 OF DRP. 

This step is decisive because if the borrower fails to meet the above notice in time, then he/she is described as "non-cooperative" and the institution may terminate the contract and exercise its legal rights without further notice. During the second stage financial and other information of the borrower is collected. During the third stage the submitted financial data is evaluated. 

In particular, for each category of borrower and guarantor, indicative figures, such as its financial condition, the total amount and nature of its debts, its current ability to pay off its debts, the history of its economic behavior and the expected repayment capacity of debts are evaluated.

If, in particular, the borrower or the guarantor is an enterprise, regardless of its legal form, elements such as the business plan submitted are also assessed. The institution, throughout the evaluation phase, must make every reasonable effort to cooperate with the borrower in order to determine accurately his/her ability to repay the debt and arrive at an appropriate solution. The fourth stage proposes appropriate solutions to the borrower (settlement solution, final settlement solution). The most appropriate solution, if any, should be chosen by the credit institution. For the purposes of the Code of Ethics, an "appropriate solution" is considered to ensure compliance by the Foundation with its supervisory obligations. The fifth stage includes the procedure of examining the objections. 

The Code therefore imposes on credit institutions which are bound (by some means) to comply with, inter alia, the five stages of the DRP, before the institution has denounced the contract in question and initiate legal action to enforce the arrears.

The question arises and indeed this has been raised in the Court's judgment (see recently the decision no 38/2017 of the Multi-Member Primary Court of Larissa), whether the non-compliance with the DRP by the Bank makes the termination of the relevant credit agreement, as contrary to article 174 of the Civil Code a prohibitive provision of law.

First of all, it is not apparent from the regulation of the DRP Code that its protective purpose also falls within the scope of reviewing the validity of the complaints (contracted out), which, moreover, the content is not condemned by law; on the contrary, the purpose of the Code is the choice of the "most appropriate" case-by-case solution for the ever-increasing number of overdue appropriations. In accordance to the Code of Ethics (see Article 2 (4) of Law 4224/2013), the Bank of Greece is defined as the competent authority for monitoring and controlling the way of its implementation, for the complete and effective regulation of its systems by the obligors’ institutions as well as the only one that may require the necessary at its discretion remedies and impose sanctions against the non-complying institution in the event of systematic failure to apply the Code and system weaknesses. But the Bank of Greece cannot intervene or else receive customized dispute between the institution and the borrower. Consequently, it is clear by the Code that failure to comply with DRP by a liable institution constitutes a breach of administrative obligation, providing Bank of Greece as a controlling authority with the possibility to require the non-complying institution to take the necessary measures and to impose sanctions, but it does not appear that Law 4224/2013 or the Code is also intended to give rise to nullity in cases where the complaint took place without DRP's observance.

Otherwise, in the context of the implementation of the Governor's Act 2501 / 31.10.2002 and Regulation 178 / 19.7.2004 of the Committee of Banking and Credit Institutions of the Bank of Greece (ATHEX), which have been previously issued in order to delimit the relationship between banks and borrowers, they impose on the undertakings which are bound by their specific obligations to inform the parties to them and also it is accepted that failure to comply with those obligations entails only supervisory consequences without the issue of contractual terms’ invalidity only because of the opposition of their content to the above regulations.

Although the failure to follow the procedure as such does not result in the termination of the credit agreement, as it follows from the objectives of the Code and the previous quote of the five DRP Stages, the Code specifies or indirectly indicates the relevant with the complaint of obligations arising out of the good faith at the stage preceding the exercise of the right of termination (Art. 281 of the Civil Code), as the content of the goodwill was formed in particular the area of ​​credit transactions in the surging economic crisis leading to the rapid increase in the number of loans in delay. Therefore, the exercise of the right of termination without the prior, in whole or in part, compliance with DRP of the Code by the institution could be in principle rebutted in the context of the opposition by the borrower / borrower for abusive according to the Civil Code. In other words, it is a question of every case and evaluation of the evidence brought to court in the opposition proceedings if the omission of the above procedure by the bank in that dispute leads the opposing party to a disadvantage in relation to the situation would be created if the DRP followed, much less if the Bank ignored the borrower / borrower's request.

In other words, it is a matter of fact that is assessed firstly by the debtor's lawyer and then by the court seised, if it is justified that DRP would have resulted in a solution to the dispute, to the benefit of both parties, so that the exercise of the right to terminate the contract according to article 281 of the Civil Code is prohibited if it manifestly exceeds the limits imposed by good faith or the good morals or the social or economic purpose of the right. However, the fact that the exercise of the right in the case in question causes damage, even if it is high, to the debtor is not sufficient to classify it as abusive but must also be combined with other circumstances such as when the creditor does not have an interest in the exercise of his right if the DRP had been respected. Another factor that could be used as a tool for controlling this omission is that banks, as financial institutions which have a decisive influence on the development and operation of the companies financed by them, have increased responsibility in the course of their financial work and must take care of the interests of the businesses they finance, since the credit relationship by its very nature, as a lasting legal relationship of trust between the parties, imposes the duty of credit and protection from the banks' interests of their clients in order to avoid unreasonable consequences for them.

In conclusion, the affected debtor can make good use of the institutionalized procedure of the Code of Ethics for Banks under the conditions and facts which will be pointed out by each case of non-implementation of the Code due to a bank failure and which the debtor's legal representative.



Georgios A. Rodopoulos

Attorney at the Supreme Court