Friday, December 16, 2011

Run on the Greek banks hits the accelerator

A Guardian article reports on the continuing run on the Greek banking system.  With the collapse in confidence in the government deposit guarantee and the solvency of the banks, deposits are leaving the Greek banking system at a record setting pace.

An unprecedented exodus of capital from Greece – peaking in a record number of withdrawals from banks in recent months – has exacerbated the liquidity crisis now wracking the recession-hit country
The latest figures released by the Bank of Greece reveal that in September and October alone investors pulled €12.3bn (£10.3bn) from domestic banks, spurred by fears of political uncertainty and economic collapse. 
Overall, outflows have reached a record 25% since September 2009 – when household and corporate deposits stood at a peak of €237.5bn, the data showed. 
So 5% of peak deposits just left in one month.
Theodore Pelagidis, an economics professor at the University of Piraeus, said: "This is part of the death spiral of the recession as a result of austerity measures. People realise that contagion has come to banks and they are very afraid of losing their deposits. On average around €4bn-€5bn in capital flees the banking system every month." 
The extraordinary figures back up anecdotal evidence that it is not just the super-rich behind the flight of funds. 
Over the past year, as the eurozone debt crisis has intensified in the nation where it largely began, there have been countless cases of ordinary depositors hauling suitcases stuffed with cash to the safer destinations of Cyprus, London and Switzerland. 
The weekly Proto Thema publication reckons that some 500,000 Greeks have moved money abroad, with a record 1.2m bank transfers being made over the last 18 months. 
An estimated €40bn, amounting to 17% of the country's gross domestic product, is believed to have been withdrawn from the banking system over the past year. 
Foreign banks with branches in Athens were facilitating the cash flight, the newspaper claimed, by encouraging Greek depositors to set up bank accounts abroad. The Swiss banking groups UBS and Credit Suisse had made it much easier for investors to open accounts in Geneva and Zurich by simplifying procedures.

No comments: