At the same time, competition in the domestic Greek banking market is becoming more intense and the cost of financing is increasing, leading to a small decline in net interest rate margins in 2007 over 2006 (at bank level). It is important that banks do not try to make up for this decline by further credit expansion, especially to borrowers of low credit quality.
While the ratio of nonperforming loans to total loans fell further to 4.5% at end-2007, from 5.4% at end-2006, it is still considerably higher than the EU average. In the light of these developments, the points that the Bank of Greece has been stressing for some time have become even more relevant.