Here’s an intriguing tidbit from the Bank of Greece’s monthly financial statement for June, released on Tuesday:
That’s ‘Lending to euro area credit institutions related to monetary policy operations denominated in euro’ – or the size of European Central Bank funding for Greek banks.
At €93.8bn in June from €83.4bn in May, this ECB support jumped 4.9 per cent in a month, as Reuters reports. One month after the Greek government’s bailout, too.
Intriguing, but not at all surprising — unless you know somewhere else Greek banks could park their money safely during their country’s debt crisis (as well as away from the self-inflicted wounds of Greek regulators). Greek banks have long since taken the crown as the biggest users of ECB largesse, relative to the size of their balance sheets.
But it’s worth keeping tabs on this reliance on the ECB.
First, note the size of that number for longer-term refinancing operations — €75.7bn. Indeed, this particular monthly snapshot was taken right on edge of a recent liquidity cliff, with the ECB’s big 12-month LTRO expiring one day later.
Not a problem for Greek banks, you could say — there’s still plenty of short-term finance from the ECB to go around. True, but it’s getting more short-term over time.
Plus, exactly what collateral are Greek banks posting to the ECB from now on? A major source of supply — Greek government bonds — is going to be taken off the market in the bailout years, with a few smidgens of T-bills to assist with liquidity management. But future funding from loan books will get messier as austerity hits, even as the IMF’s latest staff report on Greece shows there’s been a bit of bank debt issued for collateral purposes in 2010:
Finally, it’s worth comparing all this ECB usage to with Piraeus Bank’s takeover offer for two state-backed lenders, Atebank and TT Postbank. After all, Piraeus Bank and Atebank have been tapping the ECB more than even other Greek lenders, as per this recent Credit Suisse chart:
Plenty of, er, synergies, there.
(Hat-tip to JCK.)
Related links:
Banks should be ‘somewhat more like Turkey’, says UBS – FT Alphaville
Bank Grεεkery – FT Alphaville
Greece debt crisis – FT / In depth