This excerpt taken from the NBG 6-K filed Aug 31, 2009.
Uncertainties, risks and prospects for the future
The main source of uncertainty to this outlook is related with a further delay of the prospected stabilization in the international economic environment than current consensus estimates suggest. Such a development would push back the expected recovery in economic growth of all countries in which NBG operates. Regarding SEE countries and Turkey, they would be mostly affected as they are highly dependent on the procyclical patterns of demand for manufacturing exports and on international capital flows. The Greek services exporting sectors shipping and tourismwould also pay an additional toll from a lengthening of the period of economic weakness worldwide, whereas, the negative feedback effects with our neighbouring economies would also intensify the negative impact on economic activity.
The Group operates in a fast growing and changing environment and acknowledges its exposure to banking risks as well as the need for effective risk management. Risk management and control form an integral part of the Groups commitment to providing continuous and high quality returns to its shareholders.
The Group pays particular attention to implementing the highest standards of credit risk management and control. The Group employs for all facilities credit risk rating and measurement systems, specifically designed to meet the particular characteristics of its various loan exposures. Active credit risk management is achieved, among others, through: a) the application of appropriate limits for exposures to a particular obligor, a group of associated obligors, obligors that belong in the same economic sector, etc.; b) the use of credit risk mitigation techniques (such as collateral and guarantees), etc.
Furthermore, due to current conditions from the global financial crisis, the Group and the Bank, following conservative credit risk policy, maintained high levels of provisions, resulting in a 66% coverage of non-performing loans.
Interest rate risk in the banking book and liquidity risk
In order to provide a hedge for the fixed interest rate exposure arising from our position in fixed rate Greek government bonds, we enter into future contracts relating to short, medium and long-term German government bonds.
Furthermore, we also engage in hedging certain designated fixed rate loans on a portfolio basis with the use of pay fixed receive floating interest rate swaps.
In order to strengthen its liquidity, the Group issued in 2009, floating rate notes of 5,1 billion, floating rate notes guaranteed by the Greek State of 500 million and increased its share capital by 1,2 billion in July 2009.