Moody’s calls fresh deposit flight a credit negative event
The reduction in Greek bank deposits over the first couple of months of this year constitutes a “credit negative” event for local lenders, international rating agency Moody’s said yesterday.
Moody’s noted that January’s 1.6billion-euro decline, which continued in February, is mainly due to the delay in the completion of the bailout review that has damaged the confidence of depositors. Depositors have grown particularly sensitive to political developments, the rating agency added, pointing out the major outflow of deposits in the first half of 2015 when the government had also been locked in endless negotiations with its creditors.
Moody’s went on to warn that if the drop in deposits continues it is possible that the funding of banks through the Bank of Greece’s emergency liquidity assistance (ELA) mechanism will increase, raising the cost of money for banks and eating into their earnings.