Fri, Jun 15, 2012 - Page 10 News List

Greek bankers see money fluttering away


Greek banking officials say that depositors unnerved by political instability and talk of a potential exit from the euro are continuing to pull out their savings from local lenders, but not at a pace that would destabilize the battered banking sector.

Outflows spiked just after the inconclusive May 6 election, and have picked up in recent days ahead of Sunday’s new vote, one official said on Wednesday.

He said the result so far is “not destabilizing,” although much will hinge on the election’s result. The vote is expected to be a close race between the pro-bailout conservatives and a radical left party vowing to scrap Greece’s commitments to rescue loan creditors for further austerity and economic reforms.

Since the Greek debt crisis broke in late 2009, depositors have slowly pulled about 72 billion euros (US$90.24 billion) from local lenders, with total household and corporate deposits standing at 165.9 billion euros in April, according to the latest data from the Bank of Greece.

Some of that money was spent, much was redeposited or invested abroad, while a portion has also been hidden away in homes, despite the risk of burglary or accident.

“Most people prefer to place their deposits in bonds issued by other eurozone countries or in eurozone bank accounts,” Attica Wealth Management managing director Theodore Krintas said. “Behavior varies as each depositor reacts according to what they have heard from friends or family, and much less in an organized structured way — as the case should be — by diversifying in several countries.”

Other analysts say a lot of money came into the Greek banking system shortly before the crisis, creating a jump in deposits of about 15 percent when the economy was not so vibrant.

Deposit outflows eased in March and April, following Greece’s second international bailout and a massive writedown in its privately held debt, but resumed last month after the election results. In a few days after the May 6 ballot, 800 million euros were pulled out.

Another Greek banker, a senior official with a leading lender, said that his customers had not stepped up withdrawals in recent days ahead of the new vote.

“The outflows are continuing, but they have not increased, compared with what happened after the May 6 elections,” he said. “There was an increase then, and since then the outflow is steady. We haven’t seen an explosion in recent days.”

Both Greek banking officials spoke on condition of anonymity because of the sensitive nature of the issue. The central bank and the finance ministry declined to comment.

Bank deposits tend to shrink during a recession, which Greece has been in for almost five years. However, the outflows have been about a broader lack of confidence in the country’s banking system.

Local banks, while healthy when the crisis broke out, have since been hammered. In particular, they suffered massive losses from their participation in the government’s debt writedown. Greek banks were among the biggest holders of the government’s bonds.

The second banking official said it was hard to predict how the deposit withdrawal trend would develop after the elections, especially if the anti-austerity leftists win.

“Everything is possible,” he said.

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