Bank sources add that this is a particularly positive development and under certain circumstances one-fifth of the amount released, i.e. at least 4 billion euros, could be channeled to the market immediately so as to bolster its liquidity, too. The Bank of Greece appears more reserved, though. Sources from the country’s central bank referred on Friday to a technical shift that should not have a significant impact on liquidity, given the major dependence that local banks have on the Eurosystem. At the end of 2011 domestic lenders had drawn some 120 billion euros from the ECB and the Emergency Liquidity Assistance (ELA), which served to secure the stability of the country’s credit system despite the particularly difficult conditions.
The industry highlights the importance of having part of the cash that was withdrawn in the last couple of years returned to the banks. Estimates suggest that about one-third of the 20-25 billion euros withdrawn in that period is being held in cash in homes around the country. Should part of this return to the country’s credit system, banks will get a much-needed lifeline, which can then be channeled back to the market to revitalize it.