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Document Type

Case Study

Case Series

Bank Holidays & Other Suspensions

Abstract

In December 2014, deposit outflows from Greek banks intensified owing to political uncertainty following the announcement of a snap presidential election and a subsequent crash of the Greek stock market. This led to a liquidity crisis in the first half of 2015. Intensifying political uncertainty, worsening liquidity, and volatility in the macroeconomic and financial markets environment peaked in the first half of 2015. The crisis was exacerbated by a February decision by the European Central Bank (ECB) that made it difficult for Greek banks to continue borrowing from its monetary policy-related liquidity programs. On June 28, 2015, the ECB announced a decision not to allow the Bank of Greece to expand current levels of emergency liquidity assistance to Greek banks because of the failure of the troika—the ECB, the International Monetary Fund, and European Union (EU)—to prolong their Economic Adjustment Program for Greece. In response, Greek authorities passed an act on that same day, initiating a bank holiday to safeguard the Greek banking sector. The holiday was initially set to last until July 6, 2015, but was later extended multiple times, until banks reopened on July 20, 2015. At that time, banks reopened following an agreement with the EU on the Third Economic Adjustment Program for Greece. The banks reopened with capital controls still in place, which lasted until September 2019. The holiday applied to all banks operating in Greece. From the end of the holiday through the end of 2015, Greek deposits stabilized, and in December 2015, deposit inflows were recorded for the Greek banking system.

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