EUROZONE-GREECE/GERMAN BANK ASSOCIATION German bank association rules out contagion from Greek crisis

Record ID: 148241

  • Title: EUROZONE-GREECE/GERMAN BANK ASSOCIATION German bank association rules out contagion from Greek crisis
  • Date: 6th July 2015
  • Summary: BERLIN, GERMANY (JULY 06, 2015) (REUTERS) EXTERIOR OF BUNDESVERBAND (GERMAN BANK ASSOCIATION) HEADQUARTERS IN BERLIN SIGN READING "GERMAN BANK ASSOCIATION" HEAD OF GERMAN BANK ASSOCIATION MICHAEL KEMMER ENTERING ROOM (SOUNDBITE) (German) HEAD OF GERMAN BANK ASSOCIATION MICHAEL KEMMER, SAYING: "The German banks were prepared for the situation we are in now. The demands of t
  • Embargoed: 21st July 2015 13:00
  • Keywords:
  • Location: Germany
  • Country: Germany
  • Topics: General
  • Reuters ID: LVA3AYFPDX3CNSJSG489L4N2SRG3
  • Aspect Ratio: 16:9
  • Story Text: The German Bank Association sent a clear message to savers in Germany on Monday (July 6) that they have nothing to worry about, despite uncertainty around Greece's future.
    Greeks rejected creditors' demands for Greek tax hikes and pension cuts on Sunday in a referendum that was more definitive than polls had predicted, with 61 percent of the population voting "no".
    Michael Kemmer, head of the German Bank Association in Berlin, said Germany was prepared to face any of the possible outcomes of the Greek crisis.
    "The German banks were prepared for the situation we are in now. The demands of the German banks are unlimited. According to the Deutsche Bundesbank up to 19 billion euro - from which you have to subtract 15 billion euro - were issued by the Reconstruction Loan Cooperation as part of the first aid package. It is basically money that the German government has sent to Athens. Of the remaining 4 billion euro, 3,6 are demands against Greek companies. Roughly 200 million euro are demands against Greek banks. Those demands are being written off, meaning Greece is not a problem anymore for German banks," he told Reuters.
    "The developments in Greece do not pose a problem for the German savers. They don't have to worry. The German banks are stable, the German banks have boosted their liquidity reserves over the last years and so the German banks are hardly affected by the Greek problem. The German banks have already stated that, so the savers can stay calm," he added.
    European bank shares fell almost two percent on Monday after Greece overwhelmingly rejected conditions of a rescue package from creditors, throwing the future of its banks and its euro zone membership into doubt.
    Spain's Santander and BBVA; France's BNP Paribas and Societe Generale, and Germany's Deutsche Bank were all down about 2 percent.
    The ECB is due to meet later on Monday and decide whether to extend emergency liquidity or not. Greece's banking system is on the brink of collapse, with estimates its four top banks have less than 1 billion euros of liquidity remaining. Concerns have risen as its banks could run out of cash within days.
    But the ECB is likely to maintain emergency funding for Greek banks at its current restricted level, people familiar with the matter said on Sunday.
    The exposure of overseas banks to Greece is relatively modest, after lenders, notably those from France and Germany, sold businesses and scaled back their Greek assets in the past four years. But investors are worried the crisis could drive up borrowing costs for governments and companies and increase losses from bad loans.
    Asked about the possibility of contagion, Kemmer was clear:
    "We think that the contagion effect is limited. In the next three or four years it will probably get harder, but the other crisis-hit countries in the Euro zone have reached a stable position. That is Spain, Portugal or Ireland. There are many ways of guaranteeing European stability like the bank union and such. That offers a very stable situation. Therefore, we think the situation in Greece will not be contagious," he stated.
    Capital controls were imposed last week in Greece to stem the outflow of cash from the banks, which have lost about 40 billion euros of savings this year, or a quarter of deposits.
    They are expected to stay shut for the foreseeable future, and Athens could need to start printing money when they do re-open. A new financial system may need to be built, with banks nationalized and transformed into new lenders as part of a multi-year workout, analysts and restructuring sources said.
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