Recently published research from Business Monitor International, "Greece Commercial Banking Report Q3 2012", is now available at Fast Market Research

Boston, MA -- (ReleaseWire) -- 09/25/2012 --BMI View: The foundations of the Greek banking sector are crumbling as corporate and retail depositors continue to withdraw funds on mass and rush for the exits. Only the supply of cheap and easily accessible funds from the European Central Bank have kept the Greek system afloat. We still expect Greece to remain inside the eurozone, with the banking system likely to contract further alongside the economic depression before returning to positive albeit anaemic growth over the medium term. Without support from the European Central Bank (ECB), it is safe to say that the Greek banking system would have already folded. Two years into the most severe sovereign debt crisis in the eurozone and the most punishing programme of internal devaluation and fiscal consolidation, the banking sector has been left severely weakened. Uncertainty over whether Greece will default on the national debt and even leave the currency union altogether have underpinned a silent run on domestic banks. Indeed, around EUR60bn in corporate and retail deposits have been withdrawn over the past two years. It is likely that the majority of this deposit withdrawal has shown up in Germany where inflows to the banking sector have climbed over 40% in the past three years. As long as concerns persist of a disorderly default, deposit outflows from the banking system are likely to Greece Commercial Banking Report Q2 2012 © Business Monitor International Ltd Page 27 continue. Although an agreement has been reached with Greece' private creditors to restructure the national debt, upcoming parliamentary elections will ensure near-term uncertainty persists. The potential for a new coalition to be formed after the ballot which has less appetite for additional austerity could be the spur for more outflows. Assuming a broadly accommodative coalition comes to power which will continue to toe the troika line then the pace of deposit withdrawal is likely to slow. Greece's commitment to the conditions set out in the bailout programme is key for the stability of the banking system. Given that many of Greece's struggling banks are likely to be surviving only as a result of their addiction to the ECB's liquidity provisions, a disorderly default would otherwise shut off the one form of cheap funding available for domestic banks. For the time being we still believe that Greece will stay inside the eurozone with further punishing austerity ahead. In line with fiscal retrenchment which will drive the economy further into depression, we forecast the banking sector to contract by 4.5% in 2012 (revised down from 2.0% previously) and 2.0% in 2013. We continue to warn, however, that unless Greece's creditors switch towards growth strategies and away from blunt austerity, Greece would be pushed inexorably towards default and exit from the eurozone. Assuming that the more positive scenario plays out in which the core eurozone seek to restructure the economy and spur growth, we would expect to see a similar tentati

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