The European Union’s bailout of Cyprus, which involved taxing deposits at Cypriot banks, didn’t prompt savers to withdraw funds in other euro-area nations last month.
While Cypriot banks lost 1.8 billion euros ($2.4 billion) in deposits in March, deposits rose in all other euro-area countries except Belgium and Finland, European Central Bank data showed today. Cypriot deposits dropped 3.9 percent from February to 44.6 billion euros, the 10th straight decline.
Cypriot officials, euro-area finance ministers and the ECB agreed in mid-March on an unprecedented measure to impose a levy on deposits of less than 100,000 euros as part of a 10 billion-euro bailout. The plan was ditched after the country’s parliament rejected it, and a new accord was reached imposing a tax only on deposits above 100,000 euros.
“Interestingly, the bank deposit figures for March suggest little contagion from the Cyprus bail-in of uninsured depositors to other euro-zone countries, which will probably cause a sigh of relief,” said Martin van Vliet, senior euro-area economist at ING Bank NV in Amsterdam. “In fact, private-sector deposits in most other peripheral euro-zone countries saw further signs of recovery in March.”
Greek banks recorded an inflow of 1 percent, or 1.8 billion euros, while deposits increased 1.1 percent in Spain, 3.1 percent in Italy and 6.5 percent in Ireland, the ECB data show.
The Cyprus episode still damaged investor confidence across the euro region. The Stoxx Europe 600 Banks Index dropped 6.8 percent between March 15 and March 27, the day before banks reopened on the Mediterranean island with limits on withdrawals.
“We’re not seeing stress on bank deposits following the Cyprus bailout,” ECB Executive Board member Benoit Coeure said yesterday.