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Where did all the Greek deposits go?


Last Friday, Eurointelligence wrote

… Greek private sector deposit outflows slowed to €7.63bn in February from a record high of €12.79bn in January, due to the upbeat mood about the February 20 deal. A further breakdown also showed that three quarters of the withdrawn deposits stayed inside Greece while only one quarter of those deposits went abroad, according to this article on Macropolis, a marked difference to 2012. …

And on Monday, in a twitter conversation with Miquel Roig of Expansión, we were wondering about the rationality of keeping Euros in Greek banks, and he provided a link to the Bank of Greece aggregated balance sheets of monetary financial institutions (MFIs), so I decided to take a look at the financial flows by assuming the changes in stocks equal the net principal flows (excluding interest and changes to asset valuations). He suggested to do it since, say, November (before the early elections heightened political instability in Greece). The conclusions are as follows:

  • Greek banks have lost €25bn in domestic deposits (down 15% from €171bn end-November to €146bn end-February)
  • They also lost €3bn in deposits by non-€ financial institutions (down 9% from €34bn to €31bn)
  • non-€ financial institutions divested a further €20bn (down 71% from €28bn to €8bn)
  • € area financial institutions divested €9bn (down 69% from €13bn to €4bn)
  • Greek banks bought €3bn in Greek government securities (up 27% from €11bn to €14bn)

Greek bank solvency is not in danger because of an additional €3bn of Greek government debt when it’s leaking €57bn to the domestic and foreign private sector. This means that the EU creditor focus on T-bills is a red herring: it’s just a way to tighten the liquidity thumbscrews on the Greek government. Greek banks have leaked €60bn in this way without an asset liquidation (even increasing their balance from €396bn to €397bn) thanks to the Bank of Greece, which:

  • gave Greek banks an extra €59bn in funding from (up 131% from €45bn to €104bn)
  • increased by €49bn its funding from the € area (up 117% from €42bn to €91bn)

The Bank of Greece plugged the remaining hole with €9bn in “other liabilities” (up 75% from €12bn to €21bn). Contrary to what one might have expected from the large domestic deposit withdrawals and the Bank of Greece funding gap, the amount of banknotes in circulation did not increase appreciably, so the domestic deposits were not withdrawn to cash and likely ended up abroad.As pointed out in the comments, this increase in “other liabilities” likely represents an inflow of banknotes from the rest of the Eurosystem. So out of €25bn deposits withdrawn, €9bn was into cash, proverbially under the mattress.


Table 1: Major changes in the Bank of Greece balance sheet between end-November 2014 and end-February 2015

Stock Asset of Liablity of November 2014 February 2015
Claims on MFIs BoG MFIs €45bn €104bn
Liabilities to MFIs € area BoG €42bn €91bn
Other Liabilities €12bn €21bn
Balance sheet size BoG €92bn €151bn

Table 2: Major changes in the aggregated balance sheet of domestic monetary financial institutions (CIs = Credit Institutions)

Stock Asset of Liablity of November 2014 February 2015
Securities MFIs  Greek government €11bn €14bn
 Foreign (non €) €21bn €19bn
Other assets €41bn €39bn
Liabilities to BoG BoG MFIs €45bn €104bn
Liabilities to CIs € area €13bn €4bn
Foreign (non €) €28bn €8bn
Deposits non MFIs €171bn €146bn
Foreign (non €) €34bn €31bn
Balance sheet size MFIs €396bn €397bn

Table 3: Major 3-month (November to February) financing flows

Flow From To Amount
Balance sheet increase BoG €59bn
New funding from MFIs € area BoG €49bn
New other Liabilities (unspecified) €9bn
New BoG funding of MFIs BoG MFIs €59bn
Other assets reduction (unspecified) €2bn
Sold Securities Foreign (non €) €2bn
Bought Securities MFIs Greek government €3bn
Liabilities called by CIs € area €9bn
Foreign (non €) €20bn
Deposits withdrawal €3bn
non MFIs €25bn
Balance sheet increase MFIs €1bn
  1. Marcus permalink

    In fact, the number of banknotes in circulation has increased significantly:

    • Good, point, thanks.

      I suspect in the data I was using that extra cash above the allocated banknote issue is reported under “Other Liabilities” which I see increasing from €12bn to €21bn from November to February. Bloomberg gives “Greek cash use above its allocation” going from €4bn to €13bn – which is the same €9bn increase, and indicates there is an additional €8bn of “Other Liabilities” which are not cash.

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