Credit system in quarantine

Greece finds itself in a state of quarantine, as is anything related to the “Greek risk,” due to the ongoing uncertainty and the danger of a serious liquidity accident. Foreign banks and stockbrokerages have either drastically cut or altogether stopped conducting transactions with their Greek peers over fears of the complications an accident or capital controls would generate.

According to bank officials, when a country shows an increased risk, it is common practice for its partners to choose alternative solutions to minimize their own exposure to a threat. Difficulties have even been experienced in transactions carried out on the international currency exchange market, as traders ask Greek banks to commit the necessary funds before conducting any transactions.

Foreign firms are also bypassing domestic stockbrokerages and make stock market transactions directly. Citigroup’s rise from ninth place in March to third in April among the most active stockbrokerages on the Athens bourse highlights the trend recorded in the last couple of months among remote members.

There is a similar picture when it comes to orders for international corporate bonds. The exclusion of local stockbrokers creates obstacles for any investors who might have wanted to make over-the-counter transactions on international platforms for foreign as well as Greek corporate bonds.

Since the start of the year foreign portfolios have been net sellers for four consecutive months, resulting in the liquidation of shares totaling 382.65 million euros.

Similarly, banking authorities in Albania, Bulgaria, Romania, Serbia, Cyprus, Turkey and the Former Yugoslav Republic of Macedonia (FYROM) have forced the local subsidiaries of Greek banks to end their exposure to Greek risk in the form of bonds, treasury bills, Greek bank deposits, loans etc, in order to ensure that the consequences of a Greek accident on their banking system would be minimal.

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