Senior bank officials point to a decline in deposits last month, which puts an end to the rising trajectory recorded in 2016. At the end of last year deposits had climbed by 4.3 billion euros from a year earlier to reach 121.4 billion.
According to banks’ estimates, almost a quarter of the growth registered last year had gone by late January and early February, with household and business deposits slumping by about 1 billion euros.
The cause of this outflow – with the capital controls still in place – lies in the deterioration of economic sentiment in Greece, owing to the extension of the second bailout review and fresh references to a return to the drachma by ruling party officials that undermine depositors’ confidence.
Bank clients’ concerns are also associated with the possibility of a bank bail-in if local lenders fail to contain nonperforming loans and find themselves in need of another recapitalization.
Bank officials explain that the prolonged uncertainty over the bailout program’s implementation is discouraging even the money market funds that brought fresh cash into the system last year. That inflow is estimated at between 2 and 3 billion euros, and the flexibility offered to “new money” by the relaxation of the capital controls now sees depositors considering pulling out of the local credit system after the recent drachma talk.
Household savings and corporate liquidity in the local system grew from 117.1 billion euros at the end of December 2015 to 121.4 billion a year later, following a very negative 2015 when deposits shrank by 23.8 percent despite the imposition of the capital controls in late June.
That growth was attributed to the climate of relative confidence generated after the end of the first bailout review last May. Part of the increase in deposits last year is also explained by the return to the system of some cash that Greeks kept in mattresses, safe deposit boxes and elsewhere, mainly in order to pay off their tax obligations.