Greek banks to go bankrupt Monday if no debt deal – FT

As cash withdrawals from Greek banks reach €100 million a day the country’s banking system will end up bankrupt on Monday if no deal with creditors is reached over the weekend, some senior bank executives told the Financial Times (FT) on Friday.

Cash withdrawals are at a high rate despite capital controls imposed by the Greek government. If the European Central Bank (ECB) doesn’t agree to extend its emergency liquidity assistance (ELA) program, customers will be left without money by Monday, according to one of the bankers who talked to FT.

READ MORE: ‘Bank holiday’: Greece expands bank & capital limits till end of week

On Thursday the head of Greece's banking association Louka Katseli said the Greek banking system had cash guaranteed only till Monday. She didn’t say what would happen afterwards.

Banks in Greece have been effectively passing cash among themselves while the pressure increased in recent days, the bankers told FT. The Bank of Greece asked healthier banks to return some of their liquidity so that it could be shared out to weaker ones. One of the bankers said that they “don’t have any choice.”

Greek banks hold about €40 billion of loan loss provisions, covering almost 60 percent of non-performing loans, financiers say. And in the worst case scenario they might be forced to “haircut” depositors.

The Greek government on Wednesday prolonged capital controls and bank closures imposed last week, till July 10. The ECB then promised to keep the current level of its ELA to Greek banks, which is estimated at €89 billion. It is to reexamine changing the ELA conditions on Monday to hold off a collapse of the Greek financial system.

READ MORE: US & IMF call for Greek debt relief, warn of global economic damage if ‘Grexit’

Talks between Athens and Europe over the country’s reform plan and vital bailout continue. On Thursday, Greek Prime Minister Alexis Tsipras submitted new proposals to the creditors following a request for a three-year loan. Eurogroup President Jeroen Dijsselbloem said the eurozone would discuss a response to the plans on Saturday while Germany warned there was little room for easing Greece's debt burden. The Greek Parliament is set to vote on July 10 -11 on whether it will stay in the euro or leave.

The US and the IMF on Thursday have both called on European leaders to grant Greece debt relief to prevent ‘Grexit’.

Some European leaders have started talking about the possible Greek exit from the eurozone and even prepared a detailed Grexit scenario.

Athens last week failed to repay €1.6 billion to the IMF, becoming the first developed country to default on its international obligations.

Greece has a €3 billion payment to the European Central Bank due on July 20.