ATHENS--Two of Greece's biggest lenders, Eurobank Ergasias and
Alpha Bank, have formally requested access to an emergency cash
facility run by the country's central bank, amid concerns that
liquidity conditions in Greece's banking sector were tightening in
the run-up to national elections later this month.
Banking officials from the two lenders said Friday that the
moves were only a precaution and that neither faced an immediate
cash crunch. "We have made an application to the central bank," a
senior executive at one of the banks said, "but it is strictly on a
precautionary basis."
A Bank of Greece official also confirmed the requests, saying
that a decision will likely be taken by next week. People familiar
with the matter have said that Greece's two other systemic
lenders-- National Bank of Greece and Piraeus Bank--may follow suit
in the coming days.
People familiar with the matter said the two lenders were
seeking a few billion euros between them. Although the amount being
sought is small, the move has again evoked fears over the stability
of Greece's banking system as the country lurches through another
period of political uncertainty ahead of polls scheduled for Jan.
25. The last time the banks started tapping the central bank's
Emergency Liquidity Assistance fund was in August 2011 during the
depths of Greece's protracted debt crisis.
In midday trade Friday, Greek bond prices sank, with the price
on the benchmark 10-year government bond jumping roughly 0.4
percentage point to 9.5%. Greek equities tumbled, pushing the
general index 3.2% lower to below the psychologically important
800-point level. Greek banks stocks were between 6% and 8.5%
down.
Since the start of the crisis in late 2009, Greek banks have
been hit hard. Over the past five years, skittish depositors have
withdrawn some EUR70 billion ($81 billion) from Greece's banking
system; nonperforming loans now account for more than a third of
banking system loans; and the banks have had to write down billions
in euros in losses from an unprecedented EUR200 billion
sovereign-debt restructuring in early 2012.
Largely cut off from interbank lending, the Greek banks were
also forced to resort to the European Central Bank--and later the
Bank of Greece--for their cash needs. In May of 2012, as Greece
faced the first of two elections that year, Greek bank borrowings
from the ELA peaked at EUR124 billion. Since then, the banks have
paid back all their relatively pricey ELA loans, but according to
the latest data from November, were still borrowing EUR44.9 billion
from the ECB.
But as Greece heads to the polls a week from Sunday, Greek banks
are again being squeezed. In the past two months, some EUR3 billion
of deposits have again fled the banking system and there are signs
that other banks in Europe are reining in their interbank lending
to Greek banks. Also worrying is an impending deadline for Greece
to hammer out a new aid package to replace its existing EUR240
billion bailout from fellow eurozone countries and the
International Monetary Fund.
The current package runs out at the end of February--a month
after the elections--and without a new deal, Greek banks won't be
able to borrow fresh funds from the ECB. Instead, they will have to
rely on the ELA for their cash needs.
That would come at a cost though: the Bank of Greece charges a
1.55% interest rate for its cash, compared with 0.05% for the ECB.
Greek government officials estimate that a switch from one to the
other could cost the banks more than EUR1 billion in foregone
profits this year, something that would further crimp their ability
to take provisions for bad loans or finance Greek households and
businesses.
"We did make an application for ELA lending to the Bank of
Greece," said a senior official at one of the two lenders. "On
March 1, the current program comes to an end and, just in case, it
is a sensible move, it's just to be on the safe side. The amount we
are seeking is small, well below 5 billion euros, but in a
worst-case scenario, you may need it."
Nektaria Stamouli in Athens, and Simon Clark and Anuj Gangahar
in London contributed to this article.
Write to Alkman Granitsas at alkman.granitsas@wsj.com
Access Investor Kit for National Bank of Greece SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GRS003003019
Access Investor Kit for Bank of Greece SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GRS004013009
Access Investor Kit for Piraeus Bank SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GRS014003008
Access Investor Kit for Alpha Bank SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GRS015013006
Access Investor Kit for Eurobank Ergasias SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=GRS323003004
Access Investor Kit for Alpha Bank SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US02071M1018
Access Investor Kit for Eurobank Ergasias SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US26844B2097
Access Investor Kit for National Bank of Greece SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US6336437057
Subscribe to WSJ: http://online.wsj.com?mod=djnwires