A third Greek lender, Piraeus Bank, on Friday joined Alpha and Eurobank, which on Thursday filed requests to the Bank of Greece for the supply of emergency liquidity assistance (ELA). The other systemic lender, National Bank, is expected to follow suit, possibly on Monday given market conditions.
The three Greek banks have resorted to the costly method of securing cash flow for precautionary purposes, mainly because of the deterioration in liquidity conditions in the local credit sector.
Bank managers want to have all available alternative sources of funding at their disposal as it it likely that the current uncertainty will continue after the January 25 election, at least up to the end of the next government’s negotiations with the country’s creditors. Notably, none of the banks has yet made use of the ELA tool.
Alpha sources said that the ELA application has only been filed as a precaution, given also that the activation of the mechanism requires several days. They added that the reduction of liquidity due to the treasury bill issues and the drop in deposits makes it imperative to activate every available source of liquidity necessary for conservative management purposes, to be used only if required.
Eurobank officials cited similar reasons, while analysts pointed out that Eurobank has an additional source of pressure in the major drop of the euro against the Swiss franc, because the Greek lender has issued a significant amount of mortgage loans in the Swiss currency.
The slide in deposits is the main reason for banks’ cash concerns, along with the T-bills and the non-renewal of transactions in the interbank market. In December, when the snap elections were announced, deposits shrank by 3 billion euros, while in January the outflow from bank accounts is continuing apace, although banks say they have that trend under control.
The banks’ requests to enter the ELA mechanism will be examined by the European Central Bank, which oversees all eurozone lenders, on Wednesday.