June 3, 2015 / 12:40 PM / 5 years ago

Capital controls jitters triggered Greek deposit outflows - bankers

ATHENS, June 3 (Reuters) - Greek bank deposit outflows surged about fourfold over daily levels to nearly 1 billion euros last Friday on fears of capital controls, two bankers told Reuters on Wednesday, underscoring the increasingly precarious state of the banking system.

Greece’s tortuous talks with its international lenders on a cash-for-reforms deal over the last four months has raised uncertainty and fears of restrictions on money transfers, unnerving savers. The latest spike occurred on Friday before Greeks left for the long weekend with a bank holiday on Monday.

“The pace of deposit withdrawals peaked on Friday to about one billion euros for the system as a whole,” said one banker at a large Greek bank, declining to be named. “But we have not seen the same in the last two days, withdrawals are smaller.”

Deposits have been dropping steadily since October, with the liquidity squeeze making Greek banks dependent on emergency liquidity assistance (ELA) from the domestic central bank.

Another banker said Friday’s withdrawals coincided with VAT tax and social security payments and that outflows had eased this week.

“It was not just worries of capital controls, there were large payments of VAT tax by businesses as well on Friday,” the banker said.

Bank shares were gaining more than 8 percent on Wednesday on what brokers said was anticipation of a deal soon.

“The market seems to be discounting a positive outcome,” said Alexander Moraitakis, head of Athens-based Nuntius Securities.

On Wednesday the European Central Bank raised the cap on emergency liquidity assistance Greek banks can draw from the country’s central bank by 500 million euros, taking the ceiling to 80.7 billion euros (897.79 billion).

The ECB has raised the cap in increments, keeping pressure on Athens to strike a deal with its creditors over economic reforms required to unlock remaining bailout aid.

It had kept the cap unchanged in the previous week.

Bank of Greece data released last week showed that business and household bank deposits fell by 4.89 billion euros in April to 133.65 billion euros, dropping for the seventh month in a row.

April’s outflow brought business and household deposit balances to their lowest level since September 2004 as savers continue to worry over the slow-moving talks between Athens and its EU/IMF lenders. (1 US dollar = 0.8989 euro) (Reporting by George Georgiopoulos, editing by Deepa Babington)

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