The bank runs that we are watching right now in Greece are shocking, but they are only just the beginning. Since May 6th, nearly one billion dollars has been withdrawn from Greek banks. For a small nation like Greece, that is an absolutely catastrophic number.
Commonwealth Bank has been preparing for some time for a possible exit of Greece from the eurozone.
While this would soften the finacial shock for the bank, the implications of such a move would be “material”, CBA chief executive Ian Narev said today.
As financial problems in Europe again cause strains on global money markets, Mr Narev said the volatility would be felt through the Australian economy, hurting confidence while pushing up bank funding costs.
However, the fundamentals of the Australian economy remained sound, he said.
His comments came as the European Central Bank overnight said it would temporarily stop lending to some Greek banks to limit its risk to the region.
Economists warned that the Greek financial system could crumble within weeks or days unless the European Central Bank steps up support.
President Karolos Papoulias told party leaders that banks had lost €700m in withdrawals on Monday alone as citizens rush to pre-empt capital controls and a much-feared return to the Drachma.
He cited central bank warnings that "great fear" might soon escalate to panic. The leaked details lend credence to claims that capital flight by both savers and firms have reached €4bn a week since the triumph of anti-bailout parties on May 6.
Steen Jakobsen from Danske Bank said outflows are becoming unstoppable, not helped by open talk in EU circles of 'technical' plans for Greek withdrawal.
"This has a self-fulfilling prophecy built into it and I don’t think we can get to June. The fuse is burning and the only two options now are a controlled explosion where Germany steps in to ensure an orderly exit, or an uncontrolled explosion," he said.