ECONOMY

Deposits migration seems to have halted

The outflow of Greek deposits from local to foreign banks seems to have ceased, according to top bank officials.

The officials explain that deposits held by domestic lenders may have shrunk during the second half of 2010, but put this down to the country?s recession and the shrinking of incomes rather than the flight of capital to foreign shores.

The total reduction in deposits at Greeks banks throughout 2010 exceeded 13 percent, or 30 billion euros, but the first half of the year was very different to the second.

?The flight of deposits to foreign banks in the first six months of 2010 because of worries for the country?s fiscal state has stopped completely,? stressed Nikolaos Karamouzis, the deputy chief executive officer of Eurobank EFG.

?In the second half there was a slowdown in the rate of deposit reduction and the situation has now stabilized. Preliminary data for December actually show that at Eurobank we had a small increase in deposits,? he added.

Businesses have dramatically reduced their credit transactions, opting for cash instead. Along with the drop in the number of new loans issued, this has forced them to use their deposits in order to survive.

?Nowadays, any reduction in deposits is exclusively due to the recession. Because of the shrinking of incomes, households and enterprises are turning to their deposits either to respond to their obligations to the tax authorities or to maintain their standard of living,? explained Karamouzis.

?Deposit balances have now stabilized, while the domestic banking system remains healthy and robust,? said Piraeus Bank CEO Stavros Lekkakos, while Alpha Bank?s general director Giorgos Aronis stressed that people trust local lenders: ?The drop in deposits in the second half of the year is due to the recession and the inescapable decline in revenues. It would be impossible for deposits to increase while incomes fall. What is most important, though, is that trust in the local banking system remains strong.?