Deposit outflows, precaution behind Greece’s extra ELA access, say sources

The European Central Bank allowed Greek banks access to extra emergency financing from the Bank of Greece because deposit outflows have picked up and to make sure they have liquidity while tense talks take place in Brussels next week, Greek banking sources said on Friday.

The ECB on Thursday raised the cap on what Greek banks can get from the Bank of Greece through the Emergency Liquidity Assistance (ELA) window by about 5 billion euros to 65 billion euros. The extension will run until Feb. 18 when the ECB Governing Council will reappraise the situation.

One banking source said that there was a mix of reasons for the action. “Some banks likely needed to tap more ELA,” said the senior banker at one of the country’s four top banks. “(But) I believe the ECB wanted to allow some headroom, liquidity comfort until February 18.”

He said recent daily outflows were in the region of 300 million to 500 million euros on average.

Another executive at a big bank cited a similar figure.

“Outflows continued this week, the situation showed a deterioration in the last days,” he said. “When you see 400-500 million euros of outflows a day, this shows a developing trend.”

He added that outflows may have gone as high 1 billion euros on some days.

Eurozone finance ministers will meet in Brussels on Monday in an attempt to forge a deal which will allow for Greek funding over a period in which Greece’s large debt will be renegotiated.

Failure to reach a deal before the end of February, when Greece’s current bailout ends, could lead to Greece being ejected from the eurozone – hence the nervousness of Greek banks and depositors.

The bankers told Reuters that the extension, which may not have been triggered by the requirements of all banks, was also due to a desire to prepare for volatility in the next week.

“It is not clear whether it was requested due to realized outflows or as a precaution,” the second source said.

Official data showed deposit outflows were 4 billion euros in December. There are expected to have picked up to around 12 billion euros in January ahead of the January 25 general election.

Earlier in February, outflows were reported to have slowed before the standoff between Greece and its European partners.

“January was a difficult month in terms of outflows. After the election, sentiment was volatile, correlated with the course of the negotiations with the EU. This has affected outflow trends,” a third senior banking source said.