Banks to have monthly funding targets set

Development Minister Costis Hatzidakis and representatives of Greek banks agreed on Thursday to inject up to 1.5 billion euros of cash into the market, while setting monthly liquidity targets for lenders.

The minister and the Hellenic Banks Association (EET) also discussed the acceleration in the absorption of up to 3 billion euros’s worth of subsidies from the National Strategic Reference Framework and the European Investment Bank, including leveraging.

EET head Giorgos Zannias confirmed that banks can channel a total of 1.5 billion euros to small and medium-sized enterprises up to the end of 2013, echoing a similar call by European Commissioner for Regional Policy Johannes Hahn when he met with Hatzidakis a day earlier in Athens.

So far loan issuing has been particularly low, with Bank of Greece data released yesterday showing that the net flow of funding to the domestic private sector was negative by 4.1 percent in June, against 3.7 percent in May. The continuing reduction in funding reflects the negative liquidity conditions in the economy despite the general stabilization seen in the last 12 months.

BoG figures put the net negative credit flow to enterprises at 63 million euros, with the annual credit expansion rate at a negative 4.9 percent, from -3.9 percent in May 2013. The net expansion rate to non-credit companies was at -4.2 percent in June, from -3.4 percent a month earlier, with the net flow at a negative 70 million euros. Funding of the self-employed, farmers and personal corporations had a positive net flow of 12 million euros, down from 49 million euros in June 2012.

Eurosystem data showed on Thursday a 0.5 percent decline in deposits last month compared with May, with the balance of the money households and corporations keep in their bank accounts dropping to 162.65 billion euros in June. Bank officials say that the trend in favor of returning deposits seen since June 2012 stopped in spring due to negative developments in Cyprus and then the break-up of the tripartite government in June. They add that the return of deposits is an essential condition for any substantial rebound of the economy.

Given the large gap between the levels of deposits and loans, bank officials insist that with the return of some of the 90 billion euros of deposits that have left banks since the start of the crisis and with the gradual drawing of capital from the interbank market, liquidity conditions in the market can be restored.

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