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Greek depositors withdrew 700 million from banks in the country only on Monday because of fears of political chaos and growing speculation that the country will leave the euro zone, writes The Wall Street Journal.
Together with the orders of Greek banks for German bonds withdrawn from the banking system amounted to 800 million euros, said the country’s president Karolos Papoulias. The amount was confirmed by the central bank in Athens.
Because of the massive withdrawal of deposits of businesses and individuals Greek banks have become increasingly dependent on European Central Bank (ECB), the edition. This puts the institution at risk of huge losses if Greece really leave the eurozone.
“The domestic banking system continues to weaken,” said President Karolos Papoulias after talking with the manager of the Greek Central Bank George Provopolus.
Over the past two years the outflow of funds from the banking system in Greece vary between 2 and 3 billion monthly. In January withdrawals reached 5 billion.
According to the Greek central bank total deposits of local individuals and companies totaled 165.36 billion in March.
Internal sources of funding for Greek banks already loosed, is off and access to international credit markets, which means that financial institutions are highly dependent on the ECB. Only in January, Greek banks have borrowed 73 billion euros from the central bank in the euro area, and additional 54 billion euros of emergency liquidity scheme.
Risks associated with lending under extraordinary tool remain the central bank of Greece and the euro area as a whole, the edition.
Emergency lending scheme of the ECB is not long-term source of liquidity. National central banks each month must obtain approval before allowing access to financial institutions in a specific country by means of tools for emergency liquidity.
If, after new elections in Greece is an elected government that renounces the austerity measures and the agreements reached with international creditor country, the access of Greek banks to finance the ECB will also be cut.
The situation in Greece illustrates how quickly can change the circumstances for financial institutions that rely on customer confidence. In other troubled countries in the euro zone banks have no such problems, notes the magazine.
In Portugal, for example, which also speculate that it may leave the community currency, the banks managed to increase their deposit base. Central bank governor in Lisbon recently reported that household deposits increased by 11.6 billion euros last year and continue to grow this year.