Greek central banker says country being "defamed"

Provopoulos was answering questions about Piraeus Bank's takeover of troubled state lender ATEbank. MPs also asked him about reports by Reuters regarding Piraeus' chairman, Michael Sallas.

He said the articles about Sallas referred "to isolated incidents, implications that are presented as facts and selected parts of statements by experts and non-experts to arrive at an arbitrary conclusion in my opinion - that the Greek banking system is suffering from bad corporate governance and inadequate regulation."

If this were true, Provopoulos said, "then today there would no banks left standing." He added that "when a country's regulatory authority is defamed, in the end the country itself is defamed."

Greek banks, battered by the country's severe debt crisis and deep recession, have had to be recapitalised. Shut off from the interbank market, they rely on the national central bank for liquidity. They have also tapped 18 billion euros so far of 48 billion euros in agreed bailout funds from the European Union and the International Monetary Fund.

Last week, the government gave the green light for Piraeus to take over the healthy part of ATEbank, which was seriously undercapitalised and deemed unviable.

A Reuters report in July revealed how Piraeus raised more than 140 million euros of new capital via special offshore companies, some linked to Sallas and his family, funded by other Greek banks. Some academic experts described the scheme as tantamount to raising "virtual capital".

Answering opposition Syriza party MP Nadia Valavanou on the issue, Provopoulos said no Greek or European law was violated because Sallas' holding in Piraeus was under 5 percent and the loans were provided by another bank.

Provopoulos said Sallas had reported to the central bank both his direct and indirect holdings, but was not obliged to disclose holdings of his family members because they did not act jointly with him and were not financially dependent on him.

Regarding allegations in Reuters reports that the bank was renting properties from vehicles linked to Sallas and his family, Provopoulos said the issue was being probed by the central bank. The governor, a former senior executive at Piraeus and Emporiki Bank, said that so far, "there is no regulatory interest as far as a possible conflict of interest is concerned or a negative impact on the equity capital of Piraeus Bank."

A spokesman for Piraeus said it had nothing to add to Provopoulos' remarks.

Piraeus is suing Reuters over the story about the bank renting properties owned by companies run by Sallas and his family. The bank is claiming 50 million euros in damages.

Reuters global editor for ethics and standards, Alix M. Freedman, said: "Our coverage of Piraeus and of the Greek banking system has been accurate and fair to every person and institution involved."

(Writing by Dina Kyriakidou; Editing By Richard Woods)