30% Bail-In Haircuts Coming Up
I warned countless times over the last six months that Greek citizens need to pull their deposits before it was too late.
Today I report it’s too late. 30% bail-in haircuts on Greek bank deposits are coming up.
Banks to Raid Deposits to Avert Collapse
The Financial Times reports Greek Banks Prepare Plan to Raid Deposits to Avert Collapse
Greek banks are preparing contingency plans for a possible “bail-in” of depositors amid fears the country is heading for financial collapse, bankers and businesspeople with knowledge of the measures said on Friday.
The plans, which call for a “haircut” of at least 30 per cent on deposits above €8,000, sketch out an increasingly likely scenario for at least one bank, the sources said.
“It [the haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” said one person following the issue. “This is not something that is going to happen immediately.”
Greece’s banks have been closed since Monday, when capital controls were imposed to prevent a bank run following the leftwing Syriza-led government’s call for a referendum on a bailout plan it had earlier rejected. Greece’s highest court rejected an appeal by two citizens on Friday who had asked for the referendum to be declared unconstitutional.
Depositors can withdraw only €60 a day from bank ATM cash machines, while requests to transfer funds abroad have to be approved by a special finance ministry committee in co-operation with the Greek central bank.
Greek deposits are guaranteed up to €100,000, in line with EU banking directives, but the country’s deposit insurance fund amounts to only €3bn, which would not be enough to cover demand in case of a bank collapse.
With few deposits over €100,000 left in the banks after six months of capital flight, “it makes sense for the banks to consider imposing a haircut on small depositors as part of a recapitalisation. . . It could even be flagged as a one-off tax,” said one analyst.
It’s Too Late
In honor of the bail-in I offer this musical tribute.
Link if video does not play: Carole King – It’s Too Late
That was Track 3 from the album, “Tapestry” (1971), one of the best-selling albums of all time.
Why Announcement Now?
The only thing curious is the timing of the announcement. Actually, there was no official announcement. Rather a statement by “bankers and businesspeople” who likely wish to influence the vote to yes.
This news could do it. However, haircuts will come either way.
Mike “Mish” Shedlock