Greek Banks Use Higher Interest To Lure Back Money

Hoping to get back money customers yanked out, Greek banks are offering higher interest rates during ongoing capital controls.

ATHENS – Hoping to get back money customers yanked out, Greek banks are offering higher interest rates during ongoing capital controls.

Greeks have withdrawn more than 40 billion euros ($45 billion) of deposits since November 2014 amid fears the country could be forced out of the Eurozone.

When Prime Minister and Radical Left SYRIZA leader Alexis Tsipras in July of 2015 closed banks for three weeks and imposed capital controls it only got worse. Greeks are still limited to withdrawals of 420 euros ($469) per week and can not use their credit cards out of the country.

The disintermediation caused Greek banks to turn to the central bank for funding as people stuffed their money in mattresses, home safes, safe deposit boxes, buried it or did whatever they could to keep it out of the hands of a government it feared would confiscate it.

Last month the government scaled back some restrictions, lifting withdrawal limits on cash redeposited into the banking system. Savers can withdraw the entire amount of new cash deposits and up to 30 percent of money transferred from abroad in cash.

“We offer 1.3 percent on a six-month time deposit, the rate is higher than the 0.8 percent rate that existing accounts earn for a similar period,” Vasiliki Balaska, an account officer at Alpha Bank told Reuters.

“The entire amount of fresh cash deposited can be withdrawn, it is not subject to capital controls,” she said.

Greek central bank data showed that banknotes in circulation stood at 47 billion euros ($52.49 billion) in June. While a portion sits at the Bank of Greece’s vaults, the figure is up by about 17 billion euros ($18.98 billion) from late 2014, meaning there is money to be lured back.

Capital control rules prohibit opening new accounts, meaning they will need to deposit the money into an existing account and do some explaining.

“One cannot walk into a bank with 50,000 euros in cash and expect us to accept it without questions. It helps if they can provide withdrawal slips, showing the money was pulled out during the crisis,” another personal banker told the news agency in what could be a strong disincentive for people to trust the banks or government.