Greek banks win short respite as aid talks inch toward a deal
Greek banks probably will get only a short respite with the help of the European Central Bank from accelerating deposit outflows unless a deal is struck soon by politicians.
Greeks withdrew 20 percent of deposits held with the nation’s lenders this year as concern of an exit from the euro intensified. A drip-feed of liquidity from the ECB and Greece’s central bank has kept lenders afloat. As deposit outflows accelerated, the ECB increased the ceiling of funding three times in the last seven days alone.
“They’re being given 48 hours of respite, but if there’s no deal they can’t avoid a collapse,” said Jerome Forneris, who helps manage more than $8 billion at Banque Martin Maurel in Marseille. “They are under breathing assistance with the ECB providing hundreds of millions every day.”
Greece early on Monday presented creditors a new set of proposals that form the beginnings of a possible deal, Dutch Finance Minister Jeroen Dijsselbloem, who chairs meetings of his euro-area counterparts, said in Brussels. Meanwhile, euro-area finance chiefs remained divided over the possible introduction of capital controls as banks may be running out of the collateral they post to receive funds.
Draghi Warning
“It’s clear that at this pace of cash withdrawal, the banking sector could collapse the next few days,” said Bruno Cavalier, chief economist at Oddo & Cie. “This is basically the main pressure on the Greek government to sign the deal.”
ECB President Mario Draghi told Greek Prime Minister Alexis Tsipras in a meeting on Monday that the ECB will help secure the country’s banking system as long Greece is in an aid program, a Greek government official told reporters on condition of anonymity. Draghi said an aid accord between Greece and its creditors needs to be reached quickly, according to the official.
Investors on Monday welcomed the news on talks. National Bank of Greece SA jumped 20 percent and Alpha Bank AE rose 24 percent in Athens trading. Still, Greek bank stocks are likely to remain volatile as negotiations continue.
The ECB’s governing council plans to review the maximum level of its Emergency Liquidity Assistance for the Greek banking system within 24 hours after raising it on Monday, two people familiar with the matter said. A spokesman for the Frankfurt-based ECB declined to comment.
Capital controls would become necessary if the ECB decided not to increase emergency liquidity enough to cover deposit outflows or if the central bank opted to increase requirements for Greek banks’ collateral, Aditya Chordia, an analyst at JPMorgan, said in a note.
[Bloomberg]
