Banks see spate of withdrawals on concerns over growing crisis
Source: Agencies |
June 18, 2012, Monday
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Print Edition
Print Edition
IN Europe's most economically stricken countries, people are taking their money out of banks as a way to protect their savings from the growing financial storm.
People are worried that their savings could be devalued if their country stops using the euro, or that banks are on the verge of collapse and that governments cannot make good on deposit insurance. So in Greece, Spain and beyond they are withdrawing euros by the billions - behavior that is magnifying their countries' financial stresses.
The money is being hoarded at home or deposited in banks in more stable economies.
It's a steady bank "jog" at the moment, not a full-bore run. But it threatens to undermine the finances of those countries' already-stressed lenders. And if it does turn into a full bank run after Greece's crucial election yesterday, it could hasten financial disaster in Europe and help spread turmoil around the world.
Since the Greek debt crisis broke in late 2009, deposits have fallen by 30 percent. Savers have slowly pulled some 72 billion euros (US$90.24 billion) from local lenders, with total household and corporate deposits standing at 165.9 billion euros in April, according to the latest data from the Bank of Greece.
Spanish deposits have fallen about 6 percent over the past year. They dipped suddenly in April by about 3.1 billion euros, or 1.8 percent, to 1.62 trillion euros as problems with the country's troubled banks started to grow to alarming proportions.
This is despite the fact that deposits are guaranteed by the government up to 100,000 euros across the eurozone.
Spain's financial turmoil quickly worsened in late May, when Bankia, the country's second-largest lender, revealed it needed capital of 19 billion euros to stay afloat. Bankia denied reports of a rush by its customers to withdraw, but the bailout scared Spaniards who assumed their money was safe.
Bankia client Rosa Monsivais panicked and decided she had to move her savings from Bankia to a bank she thought would be safer. She chose a foreign bank with Spanish operations, the Dutch-owned ING bank.
It took longer than she thought, leading to anxious days until she knew her money was in her new account.
"It scared me a little. I took all my money out and put it in ING," said Monsivais, a 41-year-old graphic artist who would not say how much money she moved. "But it took a full week to do this kind of transaction. I was reading the newspaper each day and it worried me."
The money across Europe is headed different places.
Some has been withdrawn and spent out of urgent need as people lose their jobs due to the recession. Some ended up in bank accounts or invested in countries that are more stable such as Germany. The rest is being invested in property or bonds being issued by other euro countries.
The flight of money from other countries was seen as one factor pushing up central London house prices, according to Knight Frank, a real estate agency.
"While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year - those who had the funds to buy have done so - we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market," the firm said in its Prime Central London Index report.
People are worried that their savings could be devalued if their country stops using the euro, or that banks are on the verge of collapse and that governments cannot make good on deposit insurance. So in Greece, Spain and beyond they are withdrawing euros by the billions - behavior that is magnifying their countries' financial stresses.
The money is being hoarded at home or deposited in banks in more stable economies.
It's a steady bank "jog" at the moment, not a full-bore run. But it threatens to undermine the finances of those countries' already-stressed lenders. And if it does turn into a full bank run after Greece's crucial election yesterday, it could hasten financial disaster in Europe and help spread turmoil around the world.
Since the Greek debt crisis broke in late 2009, deposits have fallen by 30 percent. Savers have slowly pulled some 72 billion euros (US$90.24 billion) from local lenders, with total household and corporate deposits standing at 165.9 billion euros in April, according to the latest data from the Bank of Greece.
Spanish deposits have fallen about 6 percent over the past year. They dipped suddenly in April by about 3.1 billion euros, or 1.8 percent, to 1.62 trillion euros as problems with the country's troubled banks started to grow to alarming proportions.
This is despite the fact that deposits are guaranteed by the government up to 100,000 euros across the eurozone.
Spain's financial turmoil quickly worsened in late May, when Bankia, the country's second-largest lender, revealed it needed capital of 19 billion euros to stay afloat. Bankia denied reports of a rush by its customers to withdraw, but the bailout scared Spaniards who assumed their money was safe.
Bankia client Rosa Monsivais panicked and decided she had to move her savings from Bankia to a bank she thought would be safer. She chose a foreign bank with Spanish operations, the Dutch-owned ING bank.
It took longer than she thought, leading to anxious days until she knew her money was in her new account.
"It scared me a little. I took all my money out and put it in ING," said Monsivais, a 41-year-old graphic artist who would not say how much money she moved. "But it took a full week to do this kind of transaction. I was reading the newspaper each day and it worried me."
The money across Europe is headed different places.
Some has been withdrawn and spent out of urgent need as people lose their jobs due to the recession. Some ended up in bank accounts or invested in countries that are more stable such as Germany. The rest is being invested in property or bonds being issued by other euro countries.
The flight of money from other countries was seen as one factor pushing up central London house prices, according to Knight Frank, a real estate agency.
"While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year - those who had the funds to buy have done so - we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market," the firm said in its Prime Central London Index report.
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