Greek Banks Look For Liquidity
Banks will struggle to strengthen their liquidity in 2011. Share capital increases, bond issues, liquidity from collateral placed by government and savings management will be the key instruments in banks’ effort to disengage from European Central Bank.
Moreover, banks are about to take action in the front of deposits in order to reduce attraction and maintenance costs, following a “new memorandum” to boost liquidity without starting a price war, according to capital.gr.
They have come to conclusion that a rate competition is pointless right now and they should turn their attention into reducing the interest rates of time deposit accounts as they have been costing them more than 4.5bn euro during the last two years.
Depending on the composition of their deposits (savings accounts, time accounts, checking accounts), it is estimated that during 2009-2010 period, banks have bear an average of 2 points higher deposit rate annually. National Bank of Greece burdened by 1.5 points, while other major banks burdened by around 2.5 points.
As most households and enterprises withdraw many of their deposits, to meet current obligations, bankers estimate that it is time to move to lower interest rates on deposits. The initial attempt in last June didn’t really pay off, as outputs amounted to 27.5bn euro for the period Jan-Oct 2010, forcing banks to keep rates even higher than 4.5%.
Banks’ ability to continue paying high rates seems exhausted. A well-coordinated reduction of rates could limit interest costs and improve their profitability.
The total amount of deposits was 211.4bn euro in late October compared with 237.987bn in January. Since January 2010, households have reduced their deposits by 20.4bn euro, to 176.414bn euro from 196.86bn euro. Savings deposits decreased from 109.57bn euro to 98.89bn euro in October.
(capital.gr)