Monday, May 14, 2012

The amazing decline in Greek bank deposits

According to the Bank of Greece ("Aggregated Balance Sheet of MFIs excluding Bank of Greece"), deposits in the Greek banking system (not counting deposits from the central government) amounted to 170 BEUR per March 31, 2012. At year-end 2009, the peak before the crisis, they had stood at 242 BEUR. That's a decline of 72 BEUR during 27 months, or 2,7 BEUR per month.

To put it bluntly: that decline is not chicken-feed! If the above rate continues, Greek banks will be totally out of deposits in another 63 months (some time in 2017).

But the real amazing thing is that there still are 170 BEUR in bank deposits! Greece has been in trouble for over 2 years by now but since the beginning of this year it has really been like flirting with disaster most of the time. The Euro-exit is officially being discussed as a possiblity. Greeks are publicly debating the pro's/con's of a Euro-exit. One would have thought that in such a climate, everyone would rush to the bank to withdraw Euro bank notes while they can still be withdrawn (and saved them under the blanket at home).

Obviously, the risk is not quite as big as it would normally be because the ECB has so far stood ready to provide all funding which Greek banks have needed. They will most likely continue to do that but will that continue to make Greek savers feel safe?

If a real run on deposits would start some time soon, I would not be surprised!


  1. Don't see your point. Any depositor has lost one penny in Europe since the crisis.

    Why ? Because not a single politician would be crazy enough to let a bank collapse without repaying its customers.

    And People also know that, especially because their deposits have been saved with their taxes!!!

    The collapse of deposits in greek banks is mostly due to rich opportunists people that expect the exit of the euro and wait for the devaluation of the drachma to bring back their money in Greece, thus with an inflated purchasing power.

    That's it.

  2. I was only talking about Greek bank deposits (and not all of Europe). Sorry to disappoint you about your perceived almightiness of politicians - there is nothing which Greek politicians could do to avoid a run on banks and to prevent a banking collapse (except, of course, freeze all deposits). A run on bank deposits has already occured in the last 2 years as the numbers clearly show. It was not "avoided" by Greek politicians but, and that is quite a difference!, it was avoided by the ECBs essentially providing unlimited funding for the Greek banking sectors (and others).

    It's funny how there are always 2 sides to one issue (at least). Some time ago when I criticized that the ECB was sending money to Greece so that wealthy Greeks could send their money offshore, there was an uproar: "no, Greeks are withdrawing that money because they need it in order to pay the higher taxes and to substitute for income lost". You don't seem to see it that way...

  3. Thank you for your answer.

    I probably misspoke. When claiming politicians would not let the banks collapse, I was implicitly including central banks. So I perfectly understand you when you criticize the ECB for refinancing greek banks, even though I don't see how the ECB could have done otherwise...

    Let's make clear as well that I am absolutely not defending people that moved their money abroad. I'm on you side on this.

    In short, my point is that *policymaker* (politics+central bankers) cannot avoid a bank run, but they can keep on avoiding a collapse like they are doing right now with emergency liquidity assistance... In my view greek banks are already insolvent in this regard.

    And so far, it seems to me that people are quite aware of that, and this is why I doubt a quick bank run would happen, even though the "silent bank run" will certainly continue - for opportunity reasons rather than panic.

    1. So I see that we are in agreement. Perhaps this is of interest to you.

    2. Yes we are, just a difference of analysis on the probability of having a bad bank run in Greece soon. But only the future can tell us who is right :)

      Totally agree as well on you reasoning as a free marketer. It all depends were you are starting from. Sadly, lots of liberals/libertarians forget this simple rule.