Greek banks? subsidiaries in Southeastern Europe are coming under heavy pressure as a lack of liquidity and the high cost of funding are leading to the loss of major corporate clients and a decrease in their regional market share.
The corporate credit sector views Greek lenders? subsidiaries as particularly weak. Clients are fleeing as the subsidiaries are unable to provide them with competitive interest rates or the level of funding that foreign banks offer. As a result, Greek firms active in the countries of SE Europe are terminating their cooperation with Greek banks and turning to foreign lenders.
Before the crisis broke, local banks relied on their robust position to draw cash from the interbank market, which they then forwarded to the countries they were involved in to expand their growth. Nowadays this is impossible due to the fiscal crisis.
Greek banks are seeing their deposits shrinking while the interbank market remains closed to them, reducing cash flows to a trickle. They are also suffering due to the high cost of money, as they try to retain their deposit clients by offering them higher interest rates.
What?s more, the deposit pool in SE Europe is limited and does not allow for the autonomous growth of bank operations (i.e. drawing deposits to give out loans). Consequently the subsidiaries of major foreign banks have a great advantage in that they enjoy a lower cost of money and the funding that parent companies offer them.
Local lenders intend to deal with the situation by changing their business model outside of Greece, at least until things calm down. They are focusing on retail banking, i.e. consumer loans, housing loans and small corporate loans for the self-employed, aiming at making the most of limited resources while maintaining a strong presence in the region.