ATHENS – International banking innovator Minos A. Zombanakis passed away on December 22 following a long illness. He was 92.
Born in 1926 at Kalyves, Chania, Crete, he was the second of a farmer’s seven children. Olives and grapes were produced on the family farm and his father was the mayor of the village, the Wall Street Journal (WSJ) reported. Zombanakis began his studies at the University of Athens in 1943, during the German occupation, but never completed his undergraduate degree which did not deter him from taking graduate courses at Harvard University where he earned a Masters in Public Administration. Harvard’s Kennedy School of Government endowed the Minos A. Zombanakis chair on the International Financial System in 2010.
Working for Manufacturers Hanover Trust bank from the late 1950s to the early 1970s as their representative in Rome, the Middle East and, later, in London, he opened the bank’s office there in 1968.
The Libor (London Interbank Offer Rate) began as a way to lend money to cash-strapped companies and countries that wanted to avoid a more highly regulated U.S. market, Kathimerini reported, adding that “specifically, Zombanakis had arranged an $80 million loan to the cash-strapped Shah of Iran,” and “in another innovation, the loan charged variable rates.”
“Zombanakis said he came up with a way to reset that rate periodically based on an average of the costs of funds reported by participating banks,” WSJ reported, adding that the “rate, known as Libor, proliferated over the next four decades and eventually was the basis for pricing trillions of dollars of financial instruments ranging from home mortgages to derivatives used to bet on the direction of interest rates” and “it became controversial over the past decade when banks were found to have secretly manipulated the rate to increase trading profits.”
“Regulators have been seeking to phase out Libor in favor of a system less open to manipulation,” WSJ reported.
As early as 1976, Zombanakis warned that some countries would probably not be able to pay back the huge debts they were accumulating in this international banking system.
Zombanakis served as an advisor pro bono to many Greek governments. Constantine Karamanlis, Andreas Papandreou and his fellow Cretan and friend Constantine Mitsotakis all called upon him for his expertise.
“Former World Bank president James Wolfensohn has called him a ‘legend’ of the international banking system,” Kathimerini reported.
Manufacturers Hanover eventually through mergers became absorbed into JPMorgan Chase.
Zombanakis said in a 2012 interview with the Guardian, “You always worked in the market with the assumption that you were dealing with gentlemen and you assumed that people acted honorably because they couldn’t afford to act otherwise,” the WSJ reported.
Zombanakis lived for the last ten years in Crete, close to where he grew up, the WSJ reported adding that he continued to pay attention to the financial markets and “saw plenty of challenges for regulators.” In a 2016 interview with Bloomberg Markets, he said, “Banking now is like a prostitution racket run by pimps, there’s just too much money involved,” WSJ reported.
He was laid to rest in Kalyves on December 28. His funeral service was attended by political, economic, and religious representatives, while messages of condolences were issued on his passing by Prime Minister Alexis Tsipras and the main opposition leader, Kyriakos Mitsotakis, among others, ANA-MPA reported.