Greek Banks Admit To Charging Customers To Exchange Big Bills For Smaller Ones

Earlier this month, a reader noticed something rather disturbing. Piraeus Bank seemed to have added a new line item in one of its reports and that new line item appeared to suggest that the bank was set to charge customers for exchanging €500 notes for smaller bills.

And it wasn’t just Piraeus. Other Greek banks looked to be doing something similar.

Now it would be bad enough if this was just another example of banks making up for lost margins by passing ZIRP and NIRP onto customers via fees or if this were simply Greek banks being forced to squeeze a little extra out of their retail business because they are still wholly insolvent. But it’s the timing of these new exchange taxes that raises eyebrows.

Remember, reports began to circulate earlier this year that the ECB was considering doing away with the €500 note. That was distressing news for many Greeks who last year, fearing the troika may one day threaten to essentially confiscate their savings (again), eschewed the bank in favor of the mattress. Obviously, much of that mattress money is denominated in €500 notes - notes which Draghi is now set to phase out.

Upon hearing the news, “many in Greece – especially older people – rushed to deposit the money in their accounts,” eKathimerini wrote last month, adding that “bank officials say depositing the 500-euro notes at a bank is the only way for people to rid themselves of them without losing the money, as it is not possible to exchange them for smaller notes.”

Or at least it wouldn’t be once they’re taken out of circulation, but in the meantime it is possible, and as it turns out, Greek banks are indeed doing precisely what we suspected they were doing: they’re charging to exchange the €500 notes for smaller denominations.

Here’s eKathemirini again:

Banks collect a commission of 1.5 percent on average when changing 500-euro bills for notes of lower denominations, citing the administrative costs of keeping their branches stocked with notes of smaller value.


When exchanging one 500-euro note for smaller bills, the charge is 3-5 euros (depending on the bank), while the maximum charge comes to 200-250 euros regardless of the amount a customer wishes to exchange.

Right. Greek banks need to offset “the administrative costs of keeping their branches stocked with notes of smaller value.” Normally that would translate roughly to this: "we need to offset the administrative costs of being a bank," but because this is Greece, the banks get to blame the ECB and Brussels: 

In response to criticism about the commission they charge, banks counter that the administrative cost of supplying their branches around the country with smaller banknotes is unusually high at present with the capital controls still in place and a 420-euro cap on the weekly amount that can be withdrawn in cash.

It's not immediately clear why that makes sense, but we're sure they'd have an answer should anyone care to ask.

As eKathimerini continues, "people started going to banks to exchange top-denomination euro bills after it was reported that the European Central Bank intends to withdraw them as a measure against money laundering." So if you are Greek and you were effectively forced to take your money out of the bank because after last summer you feared a depositor bail-in might be right around the corner, you now have the distinct pleasure of having to pay a fee to exchange your large bills for smaller ones at the very same banks where you withdrew the money in the first place. But that's all part of living in a debt colony of Germany we suppose.

The question now is how long before banks in countries that aren't Greece adopt the very same fees? And what will their excuse be? Does the ECB really intend to to allow banks to make a profit off of the gradual phasing out of physical bank notes?

There's no fee in Greece, of course, if you simply deposit the €500 notes in your account. Just like they'll be no fee when the final push to a cashless society begins and everyone is forced to turn in all their physical money in exchange for 0s and 1s on a computer screen. Or at least they'll be no initial fee. But trust us, you'll pay later when the economy starts to slow down and, without the option of resorting the physical cash, you'll be forced to choose between swiping your debit card or seeing the bank confiscate a portion of your deposits once central banks cut rates to -20%.