Despite the imploring of Greek bankers [9]for Greeks to "take your money out of your chests and houses – which are not safe in any case – and deposit at banks," it appears the Greek bank deposit run continues. As The ECB just announced another €900 million increase in Emergency Liquidity Assistance, strongly suggesting that in the 2 days since the last increase, banks are once again insolvent facing a liquidity crunch as the "banks are trustworthy" propaganda falls on very deaf Greek ears.
As we noted yesterday, Katseli, a former PASOK Minister, appealed to citizens to return their deposits to the banks “now that the banks are open” after a three-week holiday and capital controls.
“Banks are absolutely trustworthy,” Katseli told Mega TV “as guaranteed by the ECB and the Bank Association, but they would have been even more powerful if 40 billion euros had not been withdrawn in the last months.
“Let’s all help our economy,” Katseli urged Greeks.
“There will be no need to “haircut” deposits in the future if we all act responsibly,” she added - cheerfully I suppose.
It is not working.. as ECB ELA continues to soar...
[10]
Incidentally, this is just as we predicted last week. In "Greek Banks Just Became A "Strong Sell" At Any Price [11]" we wrote:
... even as an "unsustainable" Greece meanders day to day with yet another capital infusion to avoid a sovereign default, its insolvent banks just became the first casualty of reality. However, they may not be the only ones: recall that bank depositors are nothing more than unsecured creditors. If and when the reality of the Greek economic collapse is fully tabulated (as the IMF appears to have finally done) it won't be just the equity that is wiped out - depositors themselves face the risk of creeping haircuts to their "liabilities."
Which is why we doubt that Greek savers will rush to put their money in the banks, and why we think Draghi is taking a huge gamble by putting even more ELA into Greek banks just before the same banks will announce at any possible moment they are forced to liquidate existing shareholders. The popular outcry against the banking system once a bail in is confirmed, even if it does not involve depositors initially, will send shock waves through society and rekindle the bank run once more.
Ironically, the one thing that would help preserve confidence in the Greek banking system, is more transparency about the "performing" nature of Greek bank loans: if this amount has hit 50% (or more) on the total €210 billion of loans, then depositor haircuts become virtually inevitable - anything well below that and there would still be a modest cushion before bail-ins have to go up in the cap structure.
Which is also why we fear no transparency will be forthcoming and why we expect that people may be fooled once again into believing their savings are, well, safe only to find out the hard way they are anything but - a hard lesson that investors in insolvent Greek banks are about to learn first hand.
Sure enough, so far the score is transparency 0 - propaganda: +∞. And as duly predicted, the bank runs continue.
