Greek government officials appeared reassuring regarding the global banking turbulence’s triggered by the crisis in Credit Suisse and the collapse of the Silicon Valley Bank and some other US banks.
“Our banks guarantee deposits,: said government spokesman Giannis Oikonomou on Thursday adding that “the Greek banking system and our economy is shielded as a result of the government’s overall economic policy.”
On his part, Finance Minister Christos Staikouras told the parliament that “the Greek banking system is clearly in a much better position now to absorb any turbulence from international markets than it was four years ago.”
He added that Greek banks have restructured their balance sheets with the use of the “Hercules” programme, whose guarantees will burden the public debt, and presently have single-digit non-performing loans rates.
He noted that in July 2019, NPLs were around 44% of bank portfolios and have since dropped to 8.7% in December 2022.
Staikouras said banks have significantly boosted their liquidity through an increase in deposits and by accessing capital markets.
“Let us be specific: deposits are up 30% in the last four years, or by 50 billion euros, while access to international markets has strengthened with new issues and capital worth around 12.5 billion euros”.
Bank also enjoy capital adequacy rates much higher than the average rate and have returned to profitability after a series of loss-making years.
Staikouras warned, however, that there was no room for complacency. The uncertainties, globally, are many and the challenges are new and major. “The government, in cooperation with supervisory authorities, is monitoring developments and will continue to work towards safeguarding financial stability in the country,” he underlined.
Latest news on Credit Suisse here.
PS All we need now in this country is a bank run… 🙄
Of course bank deposits are up. The government now requires you to spend a big chunk on your bank card each year.
The banking system has around $650 trillion “invested” in derivatives. The world GDP is a bit under $100 trillion. That is like you going to lots of different bookmakers and betting 6.5 times your annual salary on a variety of sporting events. Obviously if they all lose you cannot pay and you are in deep doggy dos. The chances are, however, that some will win and some will lose and you can use the winnings to pay the losses. Hopefully you finish up ahead but even if the outcome is negative it should only represent a fraction of your salary and you can afford to pay the net loss out of that. That is the logic underpinning the banking system.
Unfortunately there is a fatal flaw in the above logic. Suppose one bookmaker has got his book completely wrong and cannot pay you your winnings? That means you cannot use those winnings to pay a bookmaker where you lost and then he cannot afford to pay a winning punter and he in turn cannot afford to pay one of his losses…and so the whole room full of dominoes topple one after the other. It is the same with the banks and Credit Suisse is the latest tier 1 bank to get into trouble. It was on the brink of starting the dominoes toppling, which is why the Swiss National Bank was so quick to jump in with massive liquidity.
It’s amazing how quickly a bank run can start. You go to bed one night and everything is fine. You get up the next morning and there is a run on the bank, internet access no longer works, ATMs are empty and branch doors are firmly locked with queues miles long. You have no access to your money. I’ve had it happen to me twice. Anybody who has a single bank account with all their money on deposit in it is stark raving mad. I never have less than four accounts with completely independent banks. It won’t help if the dominoes really start to topple because they will all go under but it helps if there is a minor fall.