The Corner

Keep Watching the Banks (2)

More color on that Greek data from the WSJ:

Greek depositors withdrew €700 million ($898 million) from the country’s banks on Monday, fueling fears of a bank run amid the growing political disarray. With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area… Monday’s deposit withdrawal far outpaced Greek banks’ steady decline in deposits since the start of the country’s debt crisis in 2009, as depositors withdraw cash and transfer funds overseas. In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, though in January they topped €5 billion.

The latest data from the Greece’s central bank show that total deposits held by domestic residents and companies stood at €165.36 billion in March.  

With domestic funds drying up—and access to interbank lending markets shut down—Greek banks have become heavily dependent on the European Central Bank for funding needs. Greek banks borrowed €73 billion through the ECB’s lending operations in January, say Bank of Greece figures, and an additional €54 billion via the ECB’s emergency-lending facility, which allows Greece’s central bank to lend money against a wider pool of collateral.

Risks associated with emergency lending remain with the Greek central bank and ultimately the Greek government and not the euro zone as a whole, as long as Greece is a member. Total borrowing from the ECB accounts for more than one-half of Greece’s gross domestic product.

Please note where I have added emphasis. The stakes just keep getting higher.  

Read the whole thing. Amidst the gloom, there is actually some good news out of Portugal (household deposits are growing). But for how long?

 

 

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