13.06.2012
By Simon Miller
European Central Bank (ECB) lending to banks in euros grew by €8.5bn (£6.8bn) last week increasing according to Simon Ward, chief economist at Henderson Global Investors.
Continued deposit flight from Greece and Spain has necessitated increased borrowing from the ECB and brings total lending to €52.8bn over the last five weeks.
Ward said the gross figure comprised of "lending related to monetary policy operations" and "other claims", under which the Greek and Irish "emergency liquidity assistance" (ELA) operations are recorded.
"The latter component fell by €61bn last week as a recapitalisation of Greek banks allowed them to switch from ELA into the weekly refinancing operation – lending under this operation surged by €68.2bn," he added.
According to Ward, lending related to monetary policy operations will rise further this week since €150.7bn has been drawn down in the weekly and one-month refinancing operations settling tomorrow versus a maturing total of €132.4bn.
He continued: "Greece and Spain probably account for the bulk of the €52.8bn lending rise over the past five weeks. Calendar May figures show an increase in Banco de Espana lending to banks of €26.3bn. Banca d'Italia lending, by contrast, was little changed – up by only €0.6bn.
"The gap between the €52.8bn system-wide rise over the past five weeks and the €26.3bn Spanish increase in May suggests that Greek banks have suffered an outflow of up to €26bn, equivalent to 6% of their total assets at the end of April and 15% of their domestic deposit base."
His comments come after reports suggested that the rate of withdrawal from Greek banks was increasing as fears grow over a 'Grexit' following the country's elections on 17 June.
Senior bankers have told Bloomberg that daily withdrawals have increased to the upper end of a €100m to €500m range this month. One banker said the drawdown may have even exceed €700m on Tuesday. Greeks have withdrawn around €72bn since its debt crisis began.
Capital controls are believed to be one of the options being considered by the European Union if Greece leaves the euro.
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