Flight of bank deposits continues

The unfounded rumors circulating over the last few months about the security of bank deposits have led to a considerable flight of capital from the local banking system, which at the end of April came to 18.5 billion euros since the start of the year. Bank of Greece data showed that in one month alone the flight of deposits amounted to 8.5 billion euros, as the sum of deposits declined from 260.3 billion euros in March to 268.8 billion euros in April. The reduction during that period coincided with rumors which emerged just before Greece signed up to the EU-IMF support package, concerning a possible default and even the freezing of deposits, which developments have proven wrong. A similar second wave has been noted this month, following the array of analyses and estimates favoring the restructuring of the country’s debt. At end-April, the deposit leakage came to 7 percent of the system’s total cash flow, although according to estimates it has moved higher this month due to the rumor mill. Bank management representatives are trying to appease people about the safety of the banking system, branding rumors of a default as «unfounded» and explain the reduction noted as «partly the result of the fall in disposable income on the part of households and corporations.» The same sources attribute part of the reduction in deposits in Greek banks to the demand for Greek bonds, while a considerable portion of the outflow is headed to subsidiaries, which, as is being confirmed, «remain within the Greek groups.» Household deposits dropped by 5.2 billion euros from March to April and by 10.5 billion euros from December to April, BoG data showed.