Bank deposit outflows spike over new tension with EU

Greek banks saw deposit outflows of about 300 million euros on Wednesday, the highest in a single day since a February deal with the eurozone that staved off a banking collapse, two senior Greek bankers familiar with the matter said on Thursday.

Greek banks have seen deposits steadily flee the system since December when political tensions rose, sparking fears of a new financial crisis and the threat of a Greek eurozone exit.

The fears receded after a Feb. 20 deal extending Greece’s bailout but have risen again in recent days as relations worsen between Athens and its eurozone creditors, which have frozen aid and left Greece on the verge of running out of cash.

Shares in Greek banks are down about 45 percent year to date.

“The uncertainty over the lack of progress in negotiations and the negative newsflow has affected sentiment,” one banker told Reuters. “It’s not a huge amount but the worry is whether this is the start of a trend that could get worse.”

Prime Minister Alexis Tsipras is due to meet top European leaders including European Central Bank chief Mario Draghi and German Chancellor Angela Merkel at the margins of an EU summit in Brussels on Thursday in the hopes of a breakthrough in talks.

A deadlock in talks between the two sides have raised fears of a euro exit or capital controls in recent days.

“Under the current climate, with worries of a ‘Grexident’, savers are unlikely to return cash to the banking system soon,” said another banker. “Outflows may continue ahead of this weekend.”

Greek banks have been kept on a tight leash by the ECB, which has cut off the lenders’ access to its main funding operations and kept them hooked on a drip feed of emergency liquidity that must be regularly renewed.

On Wednesday the ECB raised the cap on emergency funding Greek banks can draw from the domestic central Bank by 400 million euros to 69.8 billion, a banking source told Reuters.

The source said there was about 3 billion euros of untapped liquidity left in the banking system.

About 16 billion euros left the Greek banking system in December and January as parliament failed to elect a president, triggering snap elections that brought the anti-bailout government led by the leftist Syriza party to power.

The outflows continued in February but reversed course after the Feb. 20 deal extending Greece’s bailout by four months.

Official data on February outflows will be released by the Bank of Greece later in March.

In total, Greek banks’ borrowing from the ECB and the domestic central bank reached 104.3 billion euros in February, a sum equivalent to about 57 percent of the country’s gross domestic product.


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