Pressure on bank deposits has been on the rise in recent days as a result of the storm of statements by officials in Greece and abroad about the country’s default risks, leading the weekly decline rate to double from 700 million euros to 1.4 billion, according to bank executives.
The European Central Bank decided on Wednesday to raise the ceiling of the emergency liquidity assistance (ELA) mechanism that banks draw cash from by 1.5 billion euros to 75.5 billion, from 74 billion last week, to help local lenders cope with the dramatic drop in the deposits balance, which is close to 130 billion euros.
Senior bank officials say that the deposits of households and enterprises added up to 136 billion euros at the end of March, from 140.4 billion euros at end-February. Since last September, when the political and economic uncertainty started to heat up in Greece, deposits have dropped by more than 30 billion euros.
To cope with the major flight of deposits and offset local lenders’ losses from their exclusion from the interbank market, the ECB has channeled liquidity totaling 113.5 billion euros to the Greek credit system: This concerns 38 billion through the regular funding of the ECB and 75.5 billion in ELA via the Bank of Greece.
Banks say that the majority of the deposits flight recently has been due to enterprises which have international transactions and are building up their defenses over fears of an accident or the imposition of capital controls.
Wednesday’s ECB decision dispelled worries about the curtailing of the value of the collateral that Greek banks use to tap cash from the Eurosystem. Although Frankfurt formally denied that the value of Greek collateral will suffer a further haircut, bank officials told Kathimerini that the current situation cannot be sustained for long. They noted that the repeated downgradings of the Greek economy are piling on the pressure for a collateral haircut that the ECB is already examining.