The Greek Bank Run Spreads To All Four Largest Banks
While moments ago Greece was downgraded by that paragon of analytical and timing virtue, Fitch, to a negative outlook from stable, that is largely meaningless for a nation, devoid of tax revenues and increasingly deposits, which is suddenly imploding at an ever-faster motion.
What is relevant is that following yesterday's report that two Greek banks had suffered sufficiently material deposit withdrawals to force them to apply for the unpopular and highly stigmatizing Emergency Liquidity Assistance program with the ECB, now the other two of Greece's largest banks have also succumbed to reserve depletion after the Greek bank run appears to have gone viral. As Greek Capital.gr reports, now all four Greek banks have requested ELA assistance from the same ECB president who earlier today is said to have unceremoniously kicked out Greece from the ECB's QE program.
As a reminder, this is what we learned yesterday via Kathimerini:
Two Greek systemic banks reportedly submitted the first requests to the Bank of Greece for cash via the emergency liquidity assistance (ELA) system on Thursday, in response to the pressing liquidity conditions resulting from the growing outflow of deposits as well as the acquisition of treasury bills forced onto them by the state.
Banks usually resort to ELA when they face a cash crunch and do not have adequate collateral to draw liquidity from the European Central Bank, their main funding tool. ELA is particularly costly as it carries an interest rate of 1.55 percent, against just 0.05 percent for ECB funding.
The requests by the two lenders will be discussed by the ECB next Wednesday.
And now this, from Capital.gr, google translated:
All four banks in request precautionary ELA
People at the Bank of Greece confirmed that it has submitted a request from the four banks to provide liquidity through the ELA and the Bank of Greece, in the prescribed procedure, has informed the European Central Bank. Not specified amount of requests.
To the question of why Capital.gr requested liquidity through "national" ELA and not by the ECB, despite what has been interrupted and remains active financing from Frankfurt, no details were given. Note that all four Greek systemic banks open until February 28 the ECB funding to guarantee Greek government securities.
The provision of liquidity by ELA is significantly "more expensive" than the ECB, which remains less than 0.5%. The difference between the two mechanisms is that in the case of ELA guarantees can use banks are almost all assets of the loan portfolio, while the ECB needed Greek government securities.
It should however be noted that banks also have bonds of the EFSF by the recapitalization which of course no bank wants to "spend" in moments of uncertainty, preferring to exploit even at higher cost securities loans can not use EDU easy neither the ECB nor the capital market.
Earlier, the Bank of Greece rounds had confirmed the information that already two Greek banks have resorted precautionary liquidity in ELA. The representative of the National Bank, Dimitris Spyropoulos, speaking at Capital.gr said earlier that the National Bank has not had recourse to ELA and does not plan to appeal.
The request of the Greek banks will be discussed next Thursday on the ECB Governing Council in Frankfurt. Information indicates that one of the banks turned to the ELA not participated in the auction of Treasury bills held Tuesday.
Meanwhile, according to a report in Bloomberg, the Alpha Bank has submitted a request to the Bank of Greece for stimulating fluid through the ELA, the agent to invoke bank executive.
The request was a precautionary measure, and the bank does not expect that you will need to use the funds of ELA on time, said earlier in the official Bloomberg. According to the same publication and Eurobank submitted a request for precautionary line of the ELA.
According to a publication of Dow Jones Newswires, representative of Alpha Bank said the bank wanted the funding as a precautionary measure and does not intend to use it. "We are just superstitious, and be on the safe side. It is the general situation in Greece. There are many cash withdrawals, "said spokesman of Alpha Bank to Dow Jones Newswires.
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