Drop in deposits worrying banks

The slight decline of bank deposits last month, despite the strong tourism season, and the upcoming shift of all general government entities’ cash to the Bank of Greece are generating serious concern among the country’s commercial lenders.

The payment of the second installment of income tax and the first tranche of the Single Property Tax (ENFIA) in September caused a marginal drop in the deposits of households and corporations compared to the end of August, according to central bank data released on Thursday, which put the decrease at 52 million euros. Private sector deposits came to 122.57 billion euros.

However, when central government deposits are included in the sum, total deposits registered a monthly increase of 36 million euros to 133.15 billion.

The main cause of the contraction in deposits was a 242-million-euro drop in the balance of corporate accounts to 21.8 billion. Household deposits rose 190 million euros to 100.7 billion.

This decline runs counter to the positive momentum in the economy with record tourism figures and an improvement in economic sentiment, showing that the tourism revenues have vanished within the space of a few weeks.

Banks are also worried about the plan to move all cash in the accounts of the broader state sector to one account at the central bank. In a recent speech, Piraeus Bank’s chief economist Ilias Lekkos described that prospect as “a serious risk factor for banks.” It will deprive the local credit system of vital liquidity amounting to 3.3 billion euros, according to Piraeus estimates.

Central bank figures show that the sum of central government deposits amount to 10.6 billion euros, of which 2.5 billion belongs to local authorities and 2 billion comprises the deposits of social security entities.

The lack of liquidity led to a drop in loan issues, with the credit contraction amounting to 0.8 percent in September.