Banks will be up against the state in the race to maintain the banking system?s cash flow during the first half of 2011, which will probably prove crucial as sector experts expect deposits to shrink by another 10 billion euros.
Local lenders are now preparing their counterattack in an attempt to contain the outflow of deposits from the system; deposits are rapidly evaporating to cover the increased obligations of enterprises and households to the tax authorities.
Lenders? weapons include time deposits combined with state bonds, which secure high interest rates of 8 percent for short periods and 10 percent for longer ones.
Other similar combined products are already on offer and although they are not being promoted aggressively, they are being offered to those in the know as far as yields are concerned. Banks saw rates fall to 3-3.8 percent in the last couple of months of 2010 while inflation climbed to 5.5 percent. This has led to yields on bank products falling into negative territory.
Clients of lenders such as Alpha Bank and Eurobank EFG already have this option, securing an average yield of close to 5 percent. At the same time, National Bank is promoting its 18-month time deposit that doubles the interest rate in April, August and December, securing an annual return of 3.30 percent as the yield for those months amounts to 5.4 percent.
Alternative proposals by banks concern a combination with insurance products, securing high yields for part of the deposit if the client chooses a pension scheme such an idea has been implemented by small lenders including FBBank.
The next few months will be crucial because taxpayers are seeing their obligations increasing with the completion of the tax amnesty process and various other tax deadlines approaching.
Estimates put the decline in local bank deposits at as much as 2 billion euros in December alone, as the capacity of households to save money is steadily decreasing as a result of the drop in incomes. If this is added to the latest Bank of Greece data from end-November, deposits must have dropped by a total of 32 billion euros in 2010.
Household deposits fell from 196.8 billion euros in December 2009 to 173.4 billion in November 2010.