Depositors seek ways of hedging against risks to their capital

Some 200,000 time deposits in Greece with a balance above 100,000 euros are expected to be broken into smaller amounts over the next few months as depositors become increasingly worried about their money.

Time deposits in Greek banks add up to a total of 88.2 billion euros, according to February data, with 25-30 billion being in deposits exceeding 100,000 euros each. The remaining 58 billion euros is in accounts under the 100,000-euro limit, which means they are guaranteed. The capital in time deposits is twice as big as that in savings accounts, which add up to about 43.5 billion with a declining trend.

The number of time deposits above the 100,000-euro mark does not reflect the number of depositors, as bank officials explain that the 200,000 figure concerns the number of agreements between banks and their clients and not the actual number of clients. These customers have already started dividing their deposits between multiple accounts and across more systemic banks, as the credit system’s guarantee concerns up to 100,000 euros per depositor per bank.

The trend was essentially heralded by the head of the Eurogroup, who last week insisted that the weight of the restructuring of the banking sector should not exclusively burden taxpayers.

The first sign of the trend has been that approximately 200 million euros was transferred from the accounts of the three Cypriot banks operating in Greece to other Greek lenders amid fears of a haircut to deposits of Cypriot origin. Even though the Greek branches of Bank of Cyprus, Cyprus Popular (Laiki) and Hellenic have operated since Wednesday without problems under the new ownership of Piraeus Bank, several clients acted to shield themselves from unforeseeable circumstances.

The recycling of capital from one bank to another within the same country is the first knee-jerk reaction, an easy solution ahead of an unclear future, according to experts. After all, the real intention of the eurozone was reflected in a directive for the sanitization of banks in the context of the bank sector’s unification, which is set to apply from 2014.

The directive will determine the degree of participation in bank bailouts of all sources from which banks draw liquidity, such as bondholders and depositors. The participation of bondholders is being taken for granted, while it is more than likely that depositors with over 100,000 euros will also have to contribute.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.