19 Jun 2015
Greece banking stress drags euro lower – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team note that Greece is the overriding focus today as outflows from Greek banks continue to gain pace; so the liquidity crisis is on the verge of becoming a solvency crisis.
Key Quotes
“We have warned that the more pressing Achilles Heel is the Greek banks. Now less than 48 hours after the ECB extended the ELA borrowing by 1.1 bln euros to 84.1 bln, the Bank of Greece has requested another 3 bln euros, which the ECB is considering. The speculation about capital controls and Grexit has spurred the acceleration in the deposit flight.”
“Greek banks have roughly 130 bln euros in deposits. Fitch estimates that as of mid-May, Greek banks had about 40 bln euros in assets that could be used as collateral, but it appears that conditions have worsened. Moreover, Greek banks have an estimated 59 bln euros of loans that are overdue. Many were restructured at the end of last year to "extend and pretend" so as not to take impairment costs. The tangible core capital in the top four Greek banks that account for 90% of the banking assets is estimated to be only 12 bln euros.”
“The bottom line is that the liquidity crisis is on the verge of becoming a solvency crisis. Official assistance for Greek banks is about 124 bln euros going into today's ECB ELA decision. It consists of the 84 bln ELA borrowing and the about 40 bln euros from the ECB.”
“ECB's Coeure reportedly warned the Eurogroup meeting yesterday that it was not certain Greek banks could open on Monday. This seemed to be consistent with comments by Fitch's Longsdon, who warned of the possible collapse of Greek banks.”
“In anticipation of more assistance, Greek bank shares are higher on the day and performing better than Greek stocks as a whole. Near midday in London, Greek shares have given up earlier gains and are now down nearly -0.5%, with bank shares down by a somewhat greater magnitude.”
Key Quotes
“We have warned that the more pressing Achilles Heel is the Greek banks. Now less than 48 hours after the ECB extended the ELA borrowing by 1.1 bln euros to 84.1 bln, the Bank of Greece has requested another 3 bln euros, which the ECB is considering. The speculation about capital controls and Grexit has spurred the acceleration in the deposit flight.”
“Greek banks have roughly 130 bln euros in deposits. Fitch estimates that as of mid-May, Greek banks had about 40 bln euros in assets that could be used as collateral, but it appears that conditions have worsened. Moreover, Greek banks have an estimated 59 bln euros of loans that are overdue. Many were restructured at the end of last year to "extend and pretend" so as not to take impairment costs. The tangible core capital in the top four Greek banks that account for 90% of the banking assets is estimated to be only 12 bln euros.”
“The bottom line is that the liquidity crisis is on the verge of becoming a solvency crisis. Official assistance for Greek banks is about 124 bln euros going into today's ECB ELA decision. It consists of the 84 bln ELA borrowing and the about 40 bln euros from the ECB.”
“ECB's Coeure reportedly warned the Eurogroup meeting yesterday that it was not certain Greek banks could open on Monday. This seemed to be consistent with comments by Fitch's Longsdon, who warned of the possible collapse of Greek banks.”
“In anticipation of more assistance, Greek bank shares are higher on the day and performing better than Greek stocks as a whole. Near midday in London, Greek shares have given up earlier gains and are now down nearly -0.5%, with bank shares down by a somewhat greater magnitude.”