Tuesday 17 October 2017

Greece crisis: Banks to run out of collateral in 14 weeks: JP Morgan

Demonstrators in front of the parliament in Athens support the new government's push for a better deal on debt. (AP)
Demonstrators in front of the parliament in Athens support the new government's push for a better deal on debt. (AP)

Greek banks are losing around €2bn of deposits a week, a pace of outflows which, if maintained, will see them run out of collateral for new loans in 14 weeks, according to JP Morgan.

This is based on its calculation that of a maximum €108bn of financing available from the European Central Bank and Greek central bank, Greek banks have already used up €80 billion euros, leaving them with €28bn if needed.

This estimate of Greek banks' access to funding comes amid confusion about how long they can continue to function while the standoff between Athens and its international creditors over Greece's bailout program persists.

Debt-laden Greece and its euro zone creditors are having crunch talks in Brussels this week on the future of the bailout, which Athens wants renegotiated.

Much of the remaining collateral for the funds available to Greek banks is in the form of EFSF (European Financial Stability Facility) bonds from euro zone creditors that were disbursed in 2012-13 to recapitalize the country's lenders, JP Morgan said.

Total deposit outflows from Greek banks, which JP Morgan estimates by using a proxy of Greek demand for money market funds overseas, stand at 21 billion euros so far this year.

All but 4 billion euros of that was in January, ahead of the general election on Jan. 25 that saw the left-wing, anti-austerity party Syriza sweep to power.

Banking sources have told Reuters that deposit outflows are running at an average of between 300 million and 500 million euros a day, a key factor behind the ECB's decision last week to allow Greek banks access to extra emergency funding.

Greek banks are already at the 65 billion ceiling of that Emergency Liquidity Assistance (ELA), JP Morgan reckons, meaning that as things stand they will be relying on the EFSF bonds as collateral for any further funding they require.

Reuters

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