Tuesday 27 September 2016

Tsipras on track but Greeks still reluctant to leave cash in the banks

Paul Sandle

Published 03/01/2016 | 02:30

Despite Greek Prime Minister Tsipras assuring savers that his country's banks are now among the most adequately capitalised in Europe, Greeks are still unwilling to put their savings in the banks Photo: Aris Messinis
Despite Greek Prime Minister Tsipras assuring savers that his country's banks are now among the most adequately capitalised in Europe, Greeks are still unwilling to put their savings in the banks Photo: Aris Messinis

As Greek Prime Minister Alexis Tsipras braces for another round of tough negotiations with creditors, savers are still reluctant to bet their money that this year's talks will be less perilous for their country's place in the eurozone than 2015.

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Data released from Greece's central bank last week showed deposit outflows continued in November for a second consecutive month, even as the nation's lenders plugged capital shortfalls, and strict capital controls put in place last summer capped withdrawals and money transfers abroad.

Deposits held by households and businesses in Greek banks fell close to a 12-year-low of €120.9bn in November, bringing total losses to a record of more than €43bn - or 26.4pc of total savings - in the last 12 months.

Savers' distrust may derail the government's goal of lifting capital controls by the end of June. Reluctance to return deposits held abroad or under mattresses back to banks hinders the ability of lenders to provide credit to the economy, as the government struggles to lead Greece out of recession in 2016 after a turbulent year which pushed the country to the verge of leaving the eurozone.

Separate data, also released by the Bank of Greece, showed private sector deleveraging picked up pace in November, with outstanding loan balances dropping 2.2pc from the previous year.

Greek lenders cleared the hurdle of a pan-European review in 2014, thanks to capital increases of more than €8bn and restructuring plans approved by the European Commission, only to see their solvency put to the test in 2015 when Tsipras's government revolted against the terms attached to the country's bailout lifeline.

A stress test by the European Central Bank uncovered a €14.4bn hole in their books, amid increases in bad loans, subdued economic activity, expensive emergency funding requirements and strict limits on capital transfers.

Private investors plugged most of the shortfall, as bank stocks lost more than 93pc of their value in 2015.

Reuters

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