Greek banks
are increasingly being hampered from trading currencies, one of most liquid
markets, as international dealers cut back credit lines and costs soar,
according to people with knowledge of the trades.
Those
threats are adding to concern that the euro would decline in the event of a
default or a Greek exit from the currency region, leaving counterparties
exposed to multiple risks, said the people.
A
months-long impasse on Greece’s bailout talks with creditors has prompted
depositors to withdraw funds from the nation’s lenders, leaving banks no choice
but to rely on emergency funds for liquidity. The ECB on Wednesday raised the
limit on Emergency Liquidity Assistance, people familiar with the matter said,
a sign the financial system remains under strain.
“The latest
sign the market is attempting to fortify itself against a Greek default is
playing out in the FX market,” said Mark Williams, a former bank examiner for a
Federal Reserve Bank and now a lecturer at Boston University’s Questrom School
of Business. “The market has increasingly become aggressive in preparing for a
Greek default and in protecting itself from the potential financial impact.”
Spreads Widen
Greek bank
bonds fell to record lows last month. National Bank of Greece’s 750 million
euros ($850 million) of 4.375 percent bonds due April 2019 fell 25 cents on the
euro this year to an all-time low of 54.3 cents on April 21, and the notes are
now quoted at 61.4 cents, according to data compiled by Bloomberg.
Piraeus’s 5
percent notes due March 2017 also dropped 25 cents on the euro this year to a
low of 60.5 cents last month, the data show. The bonds have fallen for three
days to 65.9 cents, according to the data.
While
they’re still in a position to trade in the currency market, Greek banks are
assuming additional risk as they struggle to hedge some of their positions and
dealing costs have risen, said the people.
On some
transactions, the bid-offer spread is as much as 50 percent higher than it was
a year ago, said one person. Limited access to interbank trading has forced
Greek banks to hoard an additional 5 billion euros to 6 billion euros in
liquidity because they need to maintain higher buffers of cash, according to a
Greek banking official.
One
London-based FX sales trader said his bank continues to provide credit lines to
Greek counterparties, but these are to just cover day-to-day foreign exchange
needs, accommodating transactions on tenors that are no longer than a week, on
a case-by-case basis. The ECB raised the cap on ELA by 2 billion euros to 78.9
billion euros on Wednesday.
(Πηγή:
bloomberg.com)
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