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Greek Bank Deposits Fall to Decade Low, Euro Declines

Posted by Joseph Trevisani on Mar 26, 2015 12:29:00 PM

Greek bank deposits plummeted to their lowest level in 10 years as customers flee potential capital controls and the financial chaos that could ensue if the country leaves the euro zone.

Talks between Prime Minister Alexis Tsipras and German Chancellor Angela Merkel in Berlin which ended Monday did not produce an agreement giving Greece access to the remaining bailout funds. The nation's creditors have given the Athens government, elected on a platform of ending austerity, until Monday to provide enough details of its plan to fulfill the terms of the financial rescue to convince the lenders to release the final 7.2 billion euro installment of the bailout cash. 

The deposits of households and businesses in the Greek banking system fell 5 percent in February to 140.5 billion euros ($154 billion), their lowest level since March 2005, according to Bank of Greece data released today. Greeks have withdrawn about 23.8 billion euros from their banks in the past three months, 15 percent of the total deposit base and 1.5 billion last week.

The Greek banking system is being kept afloat by funds from the ECB via the Emergency Liquidity Assistance (ELA) program. On Wednesday the ECB Governing Council added 1 billion euros to the ELA bringing the total allotted to just over 71 billion euros. 

The Athens Stock Exchange lost 3.74 percent today with bank shares leading the way down. The euro was trading at 1.0876 against the dollar at 3:12 pm in New York having lost almost two figures from its 1.1052 European top. 

Greek depositors are fearful that the government could order capital controls on the banking system, limiting withdrawals and even imposing losses on accounts over 100,000 euros as Cyprus did in March 2013.  The withdrawal limit lasted a year and most other restrictions on domestic transactions were lifted by the end of last year. 

ECB policy makers are ensuring that Greek banks have sufficient liquidity to operate through the ELA. But the central bank’s supervisory arm is making it difficult for the banks to provide the ELA funding to the government as it struggles to pay its bills. The banks are banned from accepting short-term public debt as collateral. As of yesterday the baking system had about 3 billion euros for domestic cash needs. 

Greece began paying 1.5 billion euros of monthly pension and salary payments on Thursday. The government has already borrowed cash from public companies and pension funds to cover its obligations but such sources will not be large enough to meet its upcoming IMF and sovereign debt requirements.  European officials say Tsipras could run out of funds within weeks though no one seems to be certain how much cash Athens has on hand or what other avenues the government might tap. 

A conference call of finance ministry deputies on Wednesday set the Monday deadline for the Athens' government to submit its plan for implementing the February 20th four month extension of the bailout agreement.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

greek debt march 26

 

 

greek deposits marc 26

ase march 26

eur march 26

 

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