Deposits in Greek banks rose by just 2.7 billion euros in the year from December 2016 to November 2017, confirming that restoration of the flow of money back into the credit system is proceeding at a particularly slow rate.
Three years after the capital flight of almost 45 billion euros from November 2014 to June 2015, inflow back into the system has not topped 10 billion euros, with losses for the credit sector exceeding 33 billion.
The slow return of deposits to banks goes hand-in-hand with under-the-mattress cash hoarding: the money held outside the banking system declined by almost 15 billion euros from June 2015 to November 2017, from an estimated 50.5 billion to 35.6 billion euros. Bank officials explain that this concerns cash that was partly channeled to corporate bank accounts following payments made by individuals to retail firms like supermarkets and department stores or even used for the payment of tax obligations via bank accounts. This practice indirectly served as a supporter of deposit growth in recent months.
As the Bank of Greece noted in its latest intermediary report on monetary policy, “the redepositing of withdrawn banknotes in the banking system, the expansion of the use of online payments and transactions in money in physical form by tourists have resulted in the declining course of the estimated monetary circulation as a ratio of the quantity of money from 24 percent in December 2016 to 20.7 percent in October 2017.”
Central bank data showed that the deposits of households and enterprises in end-November 2017 came to 123.9 billion euros, from 121.6 billion in December 2016 and from about 157 billion euros in November 2014.
The biggest obstacle to banks’ effort to attract deposits is the state, which is increasing revenues by overtaxing citizens and companies while concentrating the cash reserves of all general government entities into the central bank instead of commercial lenders. Direct and indirect taxation revenues amounted to 42.4 billion euros in the first 11 months of last year, against a target for 42 billion, while the reserves of general government entities to get transferred in the coming months to the BoG are estimated at 4-5 billion euros.