Greece’s 500-euro-note bank run

Citizens who keep cash outside the banking system are running in droves to bank branches to ask for details and clarifications on reports that the European Central Bank is planning to withdraw 500-euro notes.

With the country already in a seven-year crisis, many people have opted to hide their money at home, in vaults, mattresses and other places. Banking sources say that many people have chosen 500-euro notes because they are more practical for carrying and hiding – after all, just 20 such notes come to 10,000 euros.

In 2015 alone deposits in Greece declined by 40 billion euros, with banks estimating that at least 20 billion of that went into safe deposits and mattresses.

Following the publication that European authorities were questioning whether it makes sense to have 500-euro notes in circulation, many in Greece – especially older people – rushed to deposit the money in their accounts. ECB governing council member Benoit Coeure spoke yesterday in favor of the withdrawal of the largest notes, stressing that the ECB will make a decision to that effect soon.

Bank officials note that 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. However, lenders say there is no cause for concern and that if the ECB does decide to withdraw the notes it will allow plenty of time, of more than a year, for owners to return them to the banks.

A new Morgan Stanley survey on Greece showed that 80 percent of people who withdrew their deposits from the banking system in recent months have not returned them, with 93 percent being determined not to do so. The survey also found that confidence in the Greek banking system remains low, as 62 percent of people are uncomfortable about placing money in a bank account.