Friday, 05 June 2015

While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse.
As a reminder, Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced “bail in” deposit haircut a la Cyprus.

The problem is that a Greek deposit number as of a month and a half ago is hopefully inaccurate. It is also the biggest problem for Greece, which has been desperate to prevent an all out panic among those who still have money in the banking system.

Things got dangerously close to the edge last Friday (as noted before) when things for Greece suddenly looked very bleak ahead of this week’s IMF payment and politicians were forced to turn on the Hope Theory to the max, promising a deal with Europe had never been closer.
It wasn’t, and instead Greece admitted its sovereign coffers are totally empty this week when it “bundled” its modest €345 million payment to the IMF along with others, for a lump €1.5 billion payment, which may well never happen.
And the bigger problem for Greece is that after testing yesterday the faith and resolve of its depositors (not to mention the Troika, aka the Creditors) and found lacking, said depositors no longer believe in the full faith (ignore credit) of the Greek banking system.It may have been the Greek government’s final test.
Because accoring to banking sources cited by Intelligent News, things today went from bad to horrible for Greek banks, when Greeks “responded with massive outflows to the Greece’s government decision to bundle the four tranches to IMF into one by the end of the June.”

According to banking sources, the net outflows sharply increased on Friday and the available liquidity of the domestic banking system reduced at very low and dangerous levels.
The same sources estimate the outflows on Friday around 700 million Euros from 272 million Euros on Thursday. The available emergency liquidity assistance (ELA) for the Greek banks is estimated around 800 million Euros. In addition, the outstanding amount of the total deposits of the private sector (households and corporations) has declined under 130 billion Euros or lower than the levels at early 2004.
The total net outflows in the last 7 business days are estimated 3.4 billion Euros threatening the stability of the Greek banks.
This means 2.5% of all Greek deposits were pulled in just the past 5 days! Indicatively, this is the same as if US depositors had yanked $280 billion from US banks (where total deposits amount to about $10.7 trillion)
As further reported, the Bank of Greece is set to examine on Monday if Greece will urgently ask additional ELA. However, since one of the main conditions by the ECB to keep providing ELA to Greece is for its banks to be “solvent” (a condition which is only possible thanks to the ECB), one wonders at what point the Troika, whose clear intention it has been from day one to cause the Greek bank run in the process leading to the fall of the Tsipras government, will say “no more.”

http://macedoniaonline.eu/content/view/27525/52/

Categories: EU Erosion