Last week in "For Greeks, The Nightmare Is Just Beginning: Here Come The Depositor Haircuts," we warned that a Cyprus-style bail-in of Greek depositors may be imminent given the acute cash crunch that has brought the Greek banking sector to its knees and forced the Greek government to implement capital controls in a futile attempt to stem the flow.
The depositor "haircut" would be a function of the staggered ELA haircut that the ECB could impose to escalate the rhetoric between the two sides, and could take place with as little as a 10% increase in the ELA collateral haircut from its current 50% level.
Unfortunately for Greeks, the ECB has frozen the ELA cap, meaning that as of last Sunday, Greek banks were no longer able to meet deposit outflows by tapping emergency liquidity from the Bank of Greece.
Now, with ATM liquidity expected to run out by Monday and with the country's future in the Eurozone still undecided, it appears as though Alexis Tsipras' promise that "deposits are safe" may be proven wrong.
According to FT, Greek banks are considering a depositor bail-in that could see deposits above €8,000 haircut by "at least" 30%.
Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears
The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.
A Greek bail-in could resemble the rescue plan agreed by Cyprus in 2013, when customers’ funds were seized to shore up the banks, with a haircut imposed on uninsured deposits over €100,000.
It would be implemented as part of a recapitalisation of Greek banks that would be agreed with the country’s creditors — the European Commission, International Monetary Fund and European Central Bank.
“It [the haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” said one person following the issue. “This is not something that is going to happen immediately.”
Greek deposits are guaranteed up to €100,000, in line with EU banking directives, but the country’s deposit insurance fund amounts to only €3bn, which would not be enough to cover demand in case of a bank collapse.
With few deposits over €100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.
Earlier, via Bloomberg:
Liquidity for Greek bank ATMs after Monday will depend on the ECB decision, National Bank of Greece Chair Louka Katseli tells reporters in Athens.
Meanwhile, Yanis Varoufakis swears this is nothing but a "malicious rumor":
FT report of a Gk Bank Bail In is a malicious rumour that the Head of the Greek Banks Association denied this morning http://t.co/3xtnQvpS7R— Yanis Varoufakis (@yanisvaroufakis) July 3, 2015
And moments ago Bloomberg reported that according to an emailed statement by the Greek finance ministry, the "FT report on deposits bail in is outright lie, provocative, and targets undermining July 5 referendum" and as a result the "finance ministry demands Financial Times to retract report."