J.P. Morgan Predicts Greek Banks Will Soon Run Out of Collateral

Greece
People make transactions at an ATM outside a National Bank of Greece branch in Athens, February 16, 2015. Germany's Bundesbank urged Greek banks receiving emergency funding to improve their liquidity positions and not buy short-term Greek government debt, in a monthly report published by the central bank on Monday. Alkis Konstantinidis/Reuters

LONDON (Reuters) - Greek banks are losing around 2 billion euros of deposits a week, a pace of outflows which, if maintained, will see them run out of collateral for new loans in 14 weeks, according to JP Morgan.

This is based on its calculation that of a maximum 108 billion euros of financing available from the European Central Bank and Greek central bank, Greek banks have already used up 80 billion euros, leaving them with 28 billion euros if needed.

This estimate of Greek banks' access to funding comes amid confusion about how long they can continue to function while the standoff between Athens and its international creditors overGreece's bailout program persists.

Debt-laden Greece and its euro zone creditors are having crunch talks in Brussels this week on the future of the bailout, which Athens wants renegotiated.

Much of the remaining collateral for the funds available to Greek banks is in the form of EFSF (European Financial Stability Facility) bonds from euro zone creditors that were disbursed in 2012-13 to recapitalize the country's lenders, JP Morgan said.

Total deposit outflows from Greek banks, which JP Morgan estimates by using a proxy of Greek demand for money market funds overseas, stand at 21 billion euros so far this year.

All but 4 billion euros of that was in January, ahead of the general election on Jan. 22 that saw the left-wing, anti-austerity party Syriza sweep to power.

Banking sources have told Reuters that deposit outflows are running at an average of between 300 million and 500 million euros a day, a key factor behind the ECB's decision last week to allow Greek banks access to extra emergency funding.

Greek banks are already at the 65 billion ceiling of that Emergency Liquidity Assistance (ELA), JP Morgan reckons, meaning that as things stand they will be relying on the EFSF bonds as collateral for any further funding they require.

J.P. Morgan Predicts Greek Banks Will Soon Run Out of Collateral | World