FT: Contingency plans eye “haircut” on Greek banks deposits above 8K

Article claims ‘bail in’ would come to the rescue of Greek banks in case no bailout is achieved soon

According to the Financial Times, Greece’s battered banks are “preparing contingency plans for a possible ‘bail-in’ of bank accounts, in case the country doesn’t enter into a bailout scheme soon.

Veteran FT correspondent in Athens Kerin Hope bylines the article, which was posted two days before Greeks head to the polls in a referendum viewed by most – sans the leftist Greek government – as deciding the country’s membership in the eurozone.

The article refers to plans for a “haircut” of at least… 30 percent (ouch) on deposits above 8,000 euros “for at least one bank”, citing sources.

The article then refers to the 2013 bail-in Cyprus, where the cut-off was 100,000 euros at the time, with the intent to shore up the island republic’s banking system with the billions deposited in Cypriot banks to take advantage of higher interest rates and perceived lax controls on the source of the money.

However, FT proceeds further to include all of Greece’s banking system, which at present includes four so-called “systemic banks”.

“It [haircut] would take place in the context of an overall restructuring of the bank sector once Greece is back in a bailout programme,” was the quote attributed to “one person following the issue”, who adds: “This is not something that is going to happen immediately.”

FT reminds that Greek deposits are guaranteed up to 100,000 euros in line with EU banking directives, but the country’s deposit insurance fund amounts to only three billion euros, “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,” was the way FT quoted one person identified as an analyst.