Cash to flow in if con­trols ease

Bank of­fi­cials ex­pect around 2 to 3 bil­lion eu­ros in im­me­di­ate de­posits once re­lax­ation mea­sures ap­ply

Kathimerini English - - Front Page - BY YIAN­NIS PAPADOYIANNIS

The im­ple­men­ta­tion of plans to ease cap­i­tal con­trols, al­ready pro­vi­sion­ally ap­proved by the coun­try’s cred­i­tors, will lead to the re­turn of some 2-3 bil­lion eu­ros in the form of de­posits to the Greek credit sys­tem, bank of­fi­cials es­ti­mate.

Cred­i­tors on Mon­day gave the nod to pro­pos­als sub­mit­ted by the Bank of Greece for the re­lax­ation of re­stric­tions to the flow of cap­i­tal in the Greek bank­ing sec­tor. The BoG has now tabled an of­fi­cial ap­pli­ca­tion with the Euro­pean Cen­tral Bank, which is ex­pected to be ap­proved to­mor­row dur­ing a meet­ing of its ex­ec­u­tive coun­cil. If all goes as planned, this will be the first sig­nif­i­cant eas­ing of the con­trols since they were im­posed in late June 2015 in or­der to con­tain an out­flow of de­posits.

Se­nior bank­ing of­fi­cials ar­gue that it is im­per­a­tive that so-called “new money,” mean­ing any new de­posits into the sys­tem, are ex­empted from the con­trols. Banks be­lieve that this ex­cep­tion from the rule would im­me­di­ately lead to an in­crease in de­posits of around 2 to 3 bil­lion eu­ros from money that is al­ready cir­cu­lat­ing in the mar­ket for ev­ery­day trans­ac­tions but which en­ter­prises avoid de­posit­ing in banks be­cause of the re­stric­tions that are in place.

How­ever, bank of­fi­cials agree that it will take a lot more time for any sub­stan­tial moves to be made by de­pos­i­tors to bring back the en­tire amount of 30 bil­lion eu­ros that is es­ti­mated to be hid­den in mat­tresses or safe de­posit boxes. They note that this cash will only start re­turn­ing to the sys­tem from early 2017 pro­vided that con­fi­dence is strength­ened, that there is a fur­ther eas­ing of the con­trols 1.1035 by the end of 2016 and that there are strong in­di­ca­tions of a turn­around in the econ­omy.

Bank pro­fes­sion­als view as vi­tal the ac­cel­er­a­tion of the im­ple­men­ta­tion of the agreed re­forms, the timely com­ple­tion of the sec­ond bailout review within Oc­to­ber, and an agree­ment be­tween the eu­ro­zone and the In­ter­na­tional Mon­e­tary Fund on the restora­tion of the sus­tain­abil­ity of the Greek debt.

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