Natl Bk Greece Ads (NBG)

Recent Market and Regulatory Developments

        Since September 2007, the global financial system has experienced difficult credit and liquidity conditions and disruptions leading to a lack of liquidity, greater volatility and general widening of credit spreads. In September 2008, global financial markets deteriorated sharply following the bankruptcy filing by Lehman Brothers. In the days that followed, it became apparent that a number of other major financial institutions, including some of the largest global commercial banks, investment banks, mortgage lenders, mortgage guarantors and insurance companies, were experiencing significant difficulties. As a result of the increasingly turbulent conditions in the global financial markets in the

100

second half of 2008, there has been a significant deterioration in the interbank and term funding markets as well as a material reduction in the availability of longer-term funding. In addition, the world's largest developed economies are widely considered to be in the midst of, or about to enter, economic recessions.

        In an attempt to stabilize the financial system, US and European governments (including Greece) have intervened in the global financial markets on an unprecedented scale. Despite these interventions, global investor confidence remains low and credit remains relatively scarce. On November 25, 2008, the Greek parliament approved a €28 billion plan for the support of the liquidity of the Greek Economy with the main goal of strengthening Greek banks' capital and liquidity position. The plan is comprised of three tranches, consisting of up to €5 billion in non-dilutive capital designed to increase Tier I ratios of participating banks; up to €15 billion in guarantees for short-term borrowings of participating banks; and up to €8 billion in short-term debt instruments issued to the participating banks by the Public Debt Management Agency. Participating banks are expected to use the proceeds from the guarantee and liquidity facilities to provide mortgage and SME lending in Greece, directing guarantee facility proceeds toward corporate borrowers of significant importance to Greece's development.

        Although we believe we have adequate liquidity and sound capital ratios, we have agreed to participate in the Hellenic Republic bank support plan along with other major Greek banks, and we have participated in two of the three pillars of the plan as of the date of this Annual Report an issuance of preference shares to the Hellenic Republic and an issuance of floating rate notes guaranteed by the Hellenic Republic. Our principal reasons for participating are:

•

to maintain existing and secure new liquidity facilities given the current state of the interbank lending markets and the closure of senior debt and securitization markets;



•

to continue to expand domestic credit in Greece as part of a coordinated effort to maintain liquidity in the Greek economy;



•

to increase our Tier I capital and further strengthen our capital position; and



•

to remain competitive with respect to costs of credit with our domestic and other European competitors, who participate in other European liquidity support plans.

        Financings relating to our participation in the Hellenic Republic bank support plan are discussed in Item 5.B, "Liquidity & Capital Resources—Recent Financings-Financings Under the Hellenic Republic Bank Support Plan".