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Beggar Thy Neighbor? Greece's Battered Banks Beget Balkan Jitters

Tyler Durden's picture




 

Back in April, we noted that central banks in Bulgaria, Cyprus, Albania, Romania, Serbia, Turkey and the Former Yugoslav Republic of Macedonia had all effectively moved to quarantine Greece, as it became increasingly apparent that negotiations between Athens and the troika were set to deteriorate ahead of a €750 million payment due to the IMF on May 12. 

As Kathimerini reported at the time, subsidiaries of Greek banks in Eastern Europe were told to cut exposure to “Greek bonds, T-bills, deposits in Greek banks and/or interbank funding,” in an effort to assuage concerns that any contagion from a collapse of the Greek banking sector could imperil local lenders. 

A little over two months later, Greek banks are paralyzed, having lost access to emergency central bank liquidity on the heels of PM Alexis Tsipras’ decision to put euro membership to a popular vote.

Now, bond yields indicate investors are getting nervous about the possibility that the drama in Greece could spill over into the banking sectors of Bulgaria, Romania, and Serbia where Greek banks control a substantial percentage of total banking assets:

 

Despite what certainly appears to be souring investor sentiment, depositors seem to be safe -- for now. Reuters has more:

Petar Bakhchevanov withdrew some cash from an ATM in Bulgaria's capital on Monday as a test to make sure the deepening debt crisis in neighboring Greece had not spread to the Greek-owned bank where he keeps his savings.

 

Millions of people in ex-Communist Bulgaria, Macedonia, Albania, Serbia and Romania have deposits in banks owned by Greek lenders, putting this corner of south-eastern Europe in the frontline if there is contagion from the Greek crisis.

 

Central banks in Macedonia and Serbia introduced extra restrictions on the movement of capital between local subsidiaries and their Greek parents, saying the were taking precautions against any spillover from Athens.

 

"After watching the news on TV, I just wanted to check if everything is okay and I can withdraw money from my account," said Bakhchevanov, outside a branch of Piraeus Bank Bulgaria, a subsidiary of Greece's Piraeus bank (BOPr.AT).

 

Bakchevanov was able to get at his money. He took out 100 Bulgarian levs, or around $50, from the ATM, and went inside the branch where he said bank staff had reassured him he did not need to worry about his deposit.

However, as Reuters goes on to note, there are reasons to be concerned, because with "Greek banks owning 20 percent of the banking sector in some countries the exposure is real, and the region's economies have historically been fragile, so it would not take a lot to push them into crisis too."

Here's what Morgan Stanley had to say last month about possible contagion:

The risk is that depositors who have their money in Greek subsidiaries in Bulgaria, Romania and Serbia could suffer a confidence crisis and seek to withdraw their deposits. Although well capitalised and liquid (as highlighted for Romania by the NBR’s Financial Stability Report (2013)), Greek subsidiaries in the SEE region may see difficulties providing enough cash if withdrawals are intense and become problematic. In case of a liquidity shortage, Greek subsidiaries in Bulgaria, Romania and Serbia would probably create the need for local authorities to step in. Local central banks and governments would most probably provide additional liquidity, but if panic behaviour develops it would mean that certain banks would either have to find a buyer or be nationalised. In this case, the national deposit guarantee schemes will have to repay guaranteed deposits and, in case of insufficient funds, the government will have to provide them. 

 


 

Deposits in Greek subsidiaries which would be at risk of being withdrawn in Bulgaria, Romania and Serbia amount to 14.8%, 4.1% and 6.8% of GDP, respectively. Even if we take into account that not all of them are covered by the local guarantee schemes as the individual amounts could exceed the legal limit of €100,000, the deposits at risk remain significant. Thus, a potential bank run on Greek banks in the region would have a significant negative impact on local governments’ fiscal deficit and their debt. Moreover, potential losses incurred from depositors would have a negative impact on consumption and growth in the region.

 

Deposit run: Most immediate of the bear case risks for Greek bank subsidiaries in the SEE region is the potential for sizeable deposit outflows, and we can look to Greece’s own precedent, where c.€35 billion deposits are reported to have left the system (c.21% of the total). In Bulgaria, Romania and Serbia, this risk is particularly relevant, given that the existing funding gap is already high. On average, loan/deposit ratios at Greek banks are 107% in Bulgaria, 154% in Romania and 121% in Serbia. Should deposit outflows materialise in these countries, ultimately we are looking at a combined €15 billion of funding that could be withdrawn. Yet, a potential mitigation of risk is that a large proportion of deposits are protected by guarantee funds, and we can look to the example of Bulgaria, where 72% of deposits are insured.

 


And while it seems, based on what Mr. Petar Bakhchevanov told Reuters (see above), that all is currently quiet on the Eastern front (at least as it relates to Grexit-induced bank runs), nobody is out of the woods yet, as it is still far from clear what happens next, especially now that the ECB is set to review "all legal aspects" of ELA following the Greek default which will occur at midnight on Tuesday. And with that, we'll close with the following quote from Peter Andronov, the chairman of the Association of Bulgarian Banks:

 “If everything is messed up in Greece, you never know what madness this could create."

*  *  *

Here's a summary from Reuters regarding each country's proported exposure/contagion risk:

BULGARIA

* Greek-owned banks make up a fifth of the Bulgarian banking system. These include Bulgaria's fourth largest lender United Bulgarian Bank, owned by National Bank of Greece, and Postbank, Bulgaria's fifth largest lender, controlled by Greek Eurobank. Number 9 bank Piraeus Bank Bulgaria is controlled by Piraeus Bank of Greece and Alpha Bank is a direct bank unit of Greece's Alpha Bank.

* Bulgaria's central bank, in a statement issued on Monday, said it had measures in place to insulate Greek-owned banks from contagion. It said they are financially independent from their parents, they hold no Greek government securities, and have a capital adequacy and liquidity level higher than the average for banks in Bulgaria. "Any action by the Greek government and the central bank to impose measures in the Greek financial system have no legal force in Bulgaria and can in no way affect the smooth functioning and stability of the Bulgarian banking system," the central bank said.

* A spokeswoman for United Bulgarian Bank said on Monday: "We are doing business as usual ... We reconfirm and fully agree with the central bank statement from this morning."

* In a statement, Piraeus Bank Bulgaria said the capital controls in Greece are not affecting its operations, outlining that such restrictions do not have legal force in Bulgaria and pointing out that the bank has no exposure to the Greek banking system or Greek treasuries and bonds. "For us, this Monday is a normal working day," the bank said in the statement. "Piraeus Bank Bulgaria continues with its usual work on extending loans, raising deposits.and other banking activities as it has done since it stepped on the local market," the statement said.

ROMANIA

* There are four banks with Greek majority capital operating in Romania: Alpha Bank Romania, Piraeus Bank, Bancpost, controlled by Eurobank Ergasias, and Banca Romaneasca, controlled by National Bank of Greece. Together they account for 12 percent of total banking assets in Romania.

* The central bank has said the Greek subsidiaries in Romania are well capitalised and latest data showed their average capital ratio is slightly above 17 percent - in excess of the 10 percent capital ratio requirement set by the regulator. They also have amassed robust portfolios of state securities which entitles them to resort to funding from the central bank if needed.

* Piraeus Bank Romania said in a statement on Monday: "Piraeus Bank Romania is a local subsidiary, a Romanian bank with Greek capital. All operations are localized and integrated into the Romanian banking market policies, regulated by the Romanian central bank...There are no capital control policies enforced, banks are not closed, nor are operations limited."

ALBANIA

* There are three Greek-owned banks in Albania: subsidiaries of National Bank of Greece, Piraeus Tirana Bank, and Alpha Bank. Their share of the total assets of the banking sector in Albania is 15.9 percent, down from 20 percent in 2010, Klodi Shehu, director of the financial stability department at the Albanian central bank, told Reuters.

* Shehu said the central bank imposed minimum capital adequacy ratios for Greek-owned banks of 14 percent, above the 12 percent required for other banks. The three Greek-owned banks have a capital adequacy ratio of more than 17 percent.

* "These banks are well-capitalized, liquid and capable of timely payments irrespective of what happens in Greece," Shehu told Reuters.

MACEDONIA

* Macedonia has two Greek-owned banks which together hold more than 20 percent of total banking sector assets. They are Alpha Bank AD Skopje, a subsidiary of Alpha Bank, and Stopanska Banka AD Skopje, owned by National Bank of Greece.

* On Sunday, the Macedonian central bank ordered its lenders to pull their deposits from Greek banks and it imposed temporary preventive measures to stop an outflow of capital from Macedonian subsidiaries to parent banks in Greece. It said the capital limits apply to future transactions, not to arrangements already in place.

* Under Macedonian law, the Greek parents have no way to withdraw their founding capital beyond 10 percent, unless they sell their holding to another investor.

* An official at the Macedonian central bank, who declined to be named, told Reuters that several months ago the bank instructed Greek-owned banks to provide daily reports on transactions with their parent banks as a precaution.

* In an analysis of the possible worst-case scenario, with Greek-owned banks collapsing under the weight of deposit withdrawals, Standard Bank estimated that the Macedonian government would have to come up with 250 million euros, or around three percent of gross domestic product, to fully recapitalize the banks, "something that the sovereign can live with."

SERBIA

* In Serbia, four Greek-owned banks hold around $4 billion worth of assets, or 14 percent of total banking assets. They are Alpha Bank, EUROBANK EFG, Piraeus Bank and Vojvodjanska Banka, part of the National Bank of Greece group.

* In a written answer to Reuters questions, Serbia's central bank said it had in place "an elevated level of monitoring of businesses of four Greek-owned banks, especially their liquidity, their relations with parents groups and events in international markets related to Greek banks and their subsidiaries."

* The bank said that "daily reports" provided by the Greek-owned banks showed no increased outflow of funds to mother banks nor a significant outflow of savings. The bank said Greek subsidiaries are not branch offices but separate legal entities, and that there were strict limits on shareholders repatriating capital assets of the subsidiaries.

* "The central bank will continue to monitor banks in Greek ownership and if necessary will undertake other measures under its mandate to prevent a potential negative influence on Serbia's banking sector," the bank said.

* "We have to wait and see what will happen in the next seven days. One thing is sure, banks in Greece will be in some kind of hibernation in the next 10 days given that Greece introduced capital controls. Most Greek banks that operate in Serbia are self-funded and well capitalised, so I don't expect to see any problems in the short run," said Branko Srdanovic of the Belgrade-based consultancy Associates Treasury Solutions.

 

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Mon, 06/29/2015 - 21:36 | 6252221 NoDebt
NoDebt's picture

"Battered Banks Beget Balkan Jitters"

Um... butterflies?  Bothers?

You were one word from finishing out the set.  That's what's wrong with this country today.  Buncha people not finishing what they start, bailing out at the first sign of difficulty.  Sad, really.

Mon, 06/29/2015 - 21:44 | 6252246 Creepy A. Cracker
Creepy A. Cracker's picture

Barfing

Cleverly worded headlines: "Jobs Americans won't do."

Mon, 06/29/2015 - 21:46 | 6252250 MsCreant
MsCreant's picture

Bailouts start with a "B."

Oh wait...

Too soon.

Carry on.

Mon, 06/29/2015 - 22:07 | 6252279 ZerOhead
ZerOhead's picture

It's all finally coming down exactly on schedule just like Henry and Alexis hoped back on (or before) June 12th 2012

Alexis Tsipras & Henry Kissinger!.wmv - YouTube

Syriza (and Tsipras) makes their big break and come in second in the June 17th 2012 election. When they say Henry knows everybody they ain't kidding...

https://en.wikipedia.org/wiki/Greek_legislative_election,_June_2012

Then Syriza and Tsipras WIN on Jan 25th 2013.

http://www.theguardian.com/world/live/2015/jan/25/greek-election-syriza-...

 

Henry has an eye for winners... I hope to go to the racetrack with him some day...

Mon, 06/29/2015 - 22:09 | 6252334 knukles
knukles's picture

Bulgarian 10's at a 330?  Fuck me, that's cheap!
         Back up the truck!

                         (sarc)

Tue, 06/30/2015 - 05:26 | 6253180 Supernova Born
Supernova Born's picture

Greece's Battered Banks Beget Balkan Bile.

Tue, 06/30/2015 - 05:50 | 6253193 Mountainview
Mountainview's picture

Greek banks in Balkan insolvency = Greek banks bankruptcy ( If Draghi doesn't throw more cash at them!)

Tue, 06/30/2015 - 05:51 | 6253194 Mountainview
Mountainview's picture

Greek banks in Balkan insolvency = Greek banks bankruptcy ( If Draghi doesn't throw more cash at them!)

Mon, 06/29/2015 - 21:48 | 6252261 NavMan
Tue, 06/30/2015 - 01:38 | 6253022 Kozakman
Kozakman's picture

"Butthurt" I think works best.

Tue, 06/30/2015 - 02:47 | 6253077 Nobody For President
Nobody For President's picture

I favor "Bullshit", but I'm a country boy.

Mon, 06/29/2015 - 21:40 | 6252229 NoDebt
NoDebt's picture

Serbian 2024s were trading 4 point over par a month ago.  I think that's cringe-worthy.

Mon, 06/29/2015 - 22:12 | 6252344 knukles
knukles's picture

Dude, that's only about 7 points, no?
No biggad da deal.  Y'ain't seen 'nuffin' yet!

                                "nuffin' rhymes with "stuffin'"

                In the immortal words of Timmah; "An I hepped!"

Mon, 06/29/2015 - 21:40 | 6252234 Bolesov
Bolesov's picture

Serbia, Albania and Macedonia have their own currency with a huge diaspora that has hard currency and can print at will if need. Plus most of the money is not in the banking system anyway. Bulgaria and Romania can be saved if need be at a fraction of a second and at a fraction of the cost and headaches it takes to deal with Putin's guys and the carefully placed coup in Greece.

This is a nonarticle.

Tue, 06/30/2015 - 00:55 | 6252934 disabledvet
disabledvet's picture

Seems to me this article is saying "Greece is really fucking rich"...or, at least until they shuttered all the Greek Banks and closed the Athens Stock Exchange WERE really fucking rich.

Now they look like shark bait to me.

"With a lot of meat on that bone" I might add.

They say Pirhana's can devour a human in under a minute...

Mon, 06/29/2015 - 21:44 | 6252238 MsCreant
MsCreant's picture

That new easstern bank, AIIB, is coming on line at a very interesting time. Licking their chops? They'd just want to help out old friends and neighbors in trouble, right?

Mon, 06/29/2015 - 21:45 | 6252249 NoDebt
NoDebt's picture

It wouldn't be the first time that highly indebted countries (and their embattled leadership desperate to stay in power) signed up for new claims on assets in order to vacate old claims on assets coming due.

Any port in a storm.

Mon, 06/29/2015 - 22:14 | 6252354 knukles
knukles's picture

Anyone else but me think the timing was really good as in fortuitous out the kazoo?
           And the co-incidence of Puerto Rico saying "Nyet-o"

                       The world's a beautiful place for those of us bent "just enough"

Mon, 06/29/2015 - 22:56 | 6252564 MsCreant
MsCreant's picture

Are they holding it together because it is bursting at the seams, out of control, and scared?

Or are they holding it together because they have to get the timing right?

Is it a game of Chess?

Risk?

A Monopoly-Risk hybrid..

Or is this just what happens when all the greed cream rises to the scummy top? Only the evilest need apply and so they did...

 

Mon, 06/29/2015 - 23:27 | 6252683 NoDebt
NoDebt's picture

Correct on all counts.

Mon, 06/29/2015 - 22:02 | 6252305 disabledvet
disabledvet's picture

The euro has collapsed, they're stiffing the IMF for forty billion...what's the problem here?

You can't even let a single stock trade?

Seems rather "counter-intuitive."

Asia wants to march on in there and start buying I say go right ahead...no one will complain over there.

But can they really "hang with The Big Boys" here?
Squander billions even TRILLIONS "for nothing but total bullshit"?

I say "light that candle AIIB"!

Stand and deliver!

Mon, 06/29/2015 - 22:04 | 6252312 suteibu
suteibu's picture

China may, indeed, help Greece but I don't think it will be through the new bank.  That will be focused on the Silk Road and SE Asia.

Mon, 06/29/2015 - 22:47 | 6252525 MsCreant
MsCreant's picture

I was staring at Russia, actually, and the irony of the old relationships some of these countries have had with the USSR.

Mon, 06/29/2015 - 21:46 | 6252252 umdesch4
umdesch4's picture

BRAMS? Bulgaria, Romania, Albania, Macedonia, Serbia

Mon, 06/29/2015 - 21:51 | 6252272 coast
coast's picture

MARBS.....altho yours rolls off the tongue easier. lol...ya dork, ya got me trying to come up with more...BARMS?  SMARB?  ...Yes all this stuff has finally driven me insane...lol

Mon, 06/29/2015 - 22:02 | 6252306 umdesch4
umdesch4's picture

Yeah, it even got me thinking that someone might want to bail out Macedonia so the acronym would be BRAS. My brain has been singed in a greece fire.

Mon, 06/29/2015 - 22:38 | 6252462 PersonalRespons...
PersonalResponsibility's picture

I don't normally login.  Actually, hardly ever now.  But when I do, it's for brain damaged joke threads.

Thank you Sirs/Madams

Tue, 06/30/2015 - 01:01 | 6252947 disabledvet
disabledvet's picture

Throw in Hungry (sp?) and call it BRAHMS.

Tue, 06/30/2015 - 01:09 | 6252967 disabledvet
disabledvet's picture

Wall Street can be an Angel of Mercy...but also an Angel of Death as well.

Shuttering Banks and closing the Athens Stock exchange will not go unnoticed by those trying to "move up a wrung" as they say.

Full blown Civil War? That's just for starters for The Street.

THEN the U.S. Government comes "to rescue you"...

Tue, 06/30/2015 - 05:19 | 6253175 Joe A
Joe A's picture

I live in the Balkans. Eurobank EFG some years ago was offering 8 to 10% interest if you parked your money there. I never fell for it.

Tue, 06/30/2015 - 08:09 | 6253428 PHantomofthemarkets
PHantomofthemarkets's picture

Probably because you don't have any money because most banks offered around 7-8% 5 years ago.

 

Tue, 06/30/2015 - 06:05 | 6253204 PowerAustin
PowerAustin's picture

It is funny, here, Bulgaria, local politicians and prophets say there is no threat whatsoever to Bulgaria...

Some say this would even be an opportunity to buy inexpensive Greek assets... (indeed)

 

How stupid are politicians? I want out...

Tue, 06/30/2015 - 08:15 | 6253444 PHantomofthemarkets
PHantomofthemarkets's picture

Bulgaria most likely will benefit from a Greek default in the first years.

You probably missed the part where Greeks have moved hundreds of millions to Bulgarian banks the last 2-3 years.

It is no coincidence that US propaganda is about the only one repeating for the last decade that Balkan banks are at risk because of Greece, blatantly echoed by idiots like you. The only thing that needs to worry Bulgaria is the fact that they are pegged to the euro under a currency board. Probably welcomed by people like you.

Definition of idiots: being happy to repeat all garbage propaganda coming from the west even if time after time it has been proven to be wrong.

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