Lenders lose some 8 percent of deposits
Greek banks have lost about 8 percent of their private sector deposits so far this year as customers worried about Greece’s potential debt default transferred funds abroad or bought gold, according to Moody’s.
The ratings agency said in a report that about half of the decline in deposits was also because of the cash-burn effect of Greece’s recession, which caused individuals and companies to withdraw their savings to compensate for their lower income.
But “confidence-sensitive depositors concerned about local banks’ financial health have also been transferring funds abroad and converting their deposits into gold coins, while others have been placing their cash into bank safety-[deposit] boxes,” Moody’s said, citing recent media reports.
Moody’s warned that Greek banks would face severe cash shortages if outflows increase to 35 percent of deposits. It called the current level of outflows “a key credit negative” for the banks.
Outflows accelerated in May and June because of political tensions and uncertainties regarding the commitment of European authorities to keep funding Greece, Moody’s said.
Meanwhile, sources told Reuters that up to one in six European banks is set to fail an EU-wide financial health check, with casualties expected in Greece, Germany, Portugal and Spain.
Eurozone sources said the European Banking Authority (EBA) is set to announce within weeks that between 10 and 15 of the 91 banks being tested had failed the tests.
In the drive to ensure the credibility of the bank assessments, the EBA, which runs the tests and the European Central Bank, which sets the macroeconomic scenarios, are pushing for a higher number of banks to fail than last year’s seven. ”How many do we expect to fail? I would say 10 to 15,” said one senior eurozone central banking source.
The EBA wants the number of banks that do not pass the tests to be around that level to show the examinations are serious, adding that the authority did not want to push for more, for fear it could spark panic and intensify the eurozone’s debt crisis.