Greece: National Bank Holiday, 2015

To safeguard the Greek banking sector from significantly worsening liquidity and a volatile macroeconomic and financial environment and following an ECB announcement that it would not expand ELA assistance to Greek banks, Greek authorities initiated a bank holiday on June 28, 2015. From the beginning of the political crisis in December 2014 to the beginning of the bank holiday on June 28, 2015, the banks lost EUR 47.6 billion in deposit outflows, which was 27.5% of the deposit base. The bank holiday applied to all banks that operated in Greece. The banks reopened on July 20, following an agreement with the EU on the Third Economic Adjustment Program for Greece (EC 2015a; Greece 2015; Piraeus 2015a; Piraeus 2015b).

The ECB decision in February 2015 to stop accepting Greek government bonds as collateral made it significantly more difficult for Greek banks to access ECB lending. Following this decision, the Greek banking sector significantly increased its borrowings of ELA, provided by the BoG under the control of the ECB. ELA lending to Greek banks quickly rose to EUR 87 billion at the end of June 2015, amounting to 69% of total Eurosystem funding during this period. This trend started to reverse at the end of the bank holiday. By September 2015, ELA liquidity support had decreased by EUR 5.2 billion from June 2015, owing in part to the financing of EUR 86 billion included in the Third Economic Adjustment Program, agreed to during the holiday (Piraeus 2015b).

On July 12, 2015, the euro area member states reached an agreement on a Third Economic Adjustment Program for Greece. The Eurogroup ratified this agreement with Greece on August 14, 2015, and the EC signed it into immediate effect on August 19, 2015. The objective of the Third Economic Adjustment Program was to preserve financial stability and strengthen the banking system in Greece. The program included up to EUR 86 billion from the ESM. During the negotiation of the Third Economic Adjustment Program, the European Financial Stabilization Mechanism provided a bridge loan of EUR 7 billion to Greece which was to be repaid with funds provided under the Third Economic Adjustment Program (ECB 2015b; European Council 2019b; Piraeus 2015b).

As part of the Third Economic Adjustment Program the Greek government also agreed not to interfere with bank decision-making processes or the appointment of bank boards or management and to permit banks to operate strictly on a commercial basis. The government monitored capital controls and restrictions on capital transfers and payments abroad, conditions that remained in place until 2019 (Andruszkiewicz et al. 2020; Piraeus 2015a).

At the same time as Greek authorities setting the restrictions on banking transactions, the Hellenic Capital Market Commission (HCMC) decided that the Athens Stock Exchange would remain closed throughout the bank holiday. Although the banks reopened on July 20, 2015, the HCMC extended its stock market closure to July 31, 2015. The Athens Stock Exchange reopened on August 3, 2015 (Piraeus 2015b).

On June 28, 2015, the president of the Hellenic Republic, upon the proposal of the cabinet of ministers, issued an “act of legislative content” initiating the bank holiday. The parliament then ratified the act, which entered into force once published in the Government Gazette. The inciting situation recited in this act was: “The extraordinarily urgent and unforeseeable need to protect the Greek financial system and the Greek economy in general from the liquidity shortage due to the Eurogroup decision of 27 June 2015 to deny the extension of the financial assistance (loan) agreement with Greece” (Greece 2015, 1).

Acts of legislative content were authorized by virtue of Article 44 of the Greek Constitution, which gave the president the power to issue such acts “under extraordinary circumstances of an urgent and unforeseeable need” and upon the proposal of the cabinet. These acts then had to be submitted to parliament within 40 days and be ratified by parliament within three months of their submission, or the act would no longer be in force. It is unclear when exactly this happened (Greece 2008).

The Greek authorities did not consult the ECB before initiating the bank holiday. The cabinet act from June 28 specified July 6 as the end of the holiday but allowed for the minister of finance to shorten or extend the holiday. The holiday was extended until the banks ultimately reopened on July 20 (EC 2015a; ECB 2016; Piraeus 2015b).

The initial cabinet act from June 28, which the cabinet of ministers proposed, the president passed, and the parliament ratified, established the restrictions of the bank holiday and its initial end date of July 6. The minister of finance could change restrictions and add additional restrictions as well as shorten or lengthen the holiday dates. The minister of finance was also responsible for addressing any issues that came up regarding the application of the holiday. The BoG imposed a fine of 10% of the amount of any transactions that were in breach of the holiday and any employee of a bank responsible for the breach was to be terminated. The act established a Committee for the Approval of Bank Transactions that could deem bank transactions necessary, exempting them from restrictions during the holiday. The committee consisted of five members drawn from the General Accounting Office, the Ministry of Finance, the BoG, the Hellenic Bank Association, and the HCMC. It could determine transactions were “necessary for the safeguarding of a public or social interest, including, inter alia, transactions for medical expenses or imports of pharmaceutical products” (Greece 2015).

The authorities involved in initiating the holiday were the president of the Hellenic Republic, the cabinet of ministers, and the Greek parliament. The Greek financial stability council decided on the capital controls put in place (Hope et al. 2015).

Greek authorities announced the beginning of the holiday on June 28, 2015, on TV. The BoG put out an official announcement on June 29, 2015, stating that for the duration of the holiday it would only be carrying out transactions concerning the accounts of the Greek state, legal persons in public law, and social security funds (BoG 2015a; BoG 2015b; Hope et al. 2015).

Other than these announcements there was minimal communication from the Greek authorities or the EU regarding the bank holiday. Communication appears to resume once the euro area and the Greek authorities agreed on the Third Economic Adjustment Program.

The government of Greece imposed the holiday, which applied to all banks operating in Greece—included branches of foreign banks. During the holiday, banks were to remain closed to the public, with bank access allowed only for personnel deemed necessary for the implementation of the holiday and the preparation of resuming transactions with the public at the end of the holiday. During the holiday, the only transactions that could be carried out were:

• Cash withdrawals from ATMs, limited to EUR 60 per day per card (this could be amended by the minister of finance);
• Transactions with credit and debit cards within Greece for payments to accounts held in Greece;
• Payments with prepaid cards (not exceeding the balance of the card at the beginning of the holiday);
• Electronic web banking or telephone transactions for payments in Greece (payments to accounts held in Greece);
• Cash withdrawals from ATMs via cards that had been issued abroad (Greece 2015).

The payment of pensions was specifically exempted from the holiday’s restrictions, and banks and their local branches could operate for this purpose (Greece 2015).

The minister of finance could modify, amend, and add restrictions. Restrictions did not apply to transactions with the BoG, cross-border payments paid to accounts held in Greece, settlement of transactions initiated before the beginning of the holiday, and other transactions deemed necessary by the Committee for the Approval of Bank Transactions, which the act specifically set up for that purpose. Overdue interest was not payable during the holiday and the maturity and payment of instruments was suspended during the holiday. BoG imposed a fine of 10% of the amount of any transactions that were in breach of the holiday and any employee of a bank responsible for the breach was to be terminated (Greece 2015).

During the holiday, cash withdrawals from ATMs were limited to EUR 60 per day per card, and capital transfers and payments abroad were restricted. In addition to ATMs remaining open, online banking continued and credit and debit cards could be used for payments within Greece. Prepaid cards could be used up to the balance held on them at the date of the holiday. At the end of the bank holiday, capital controls—specifically restrictions on capital transfers and payments abroad—remained in place, but Greek authorities gradually removed them (Greece 2015; Piraeus 2015a).

The payment of pensions was specifically exempted from the holiday’s restrictions and credit institutions and their local branches could operate for this purpose (Greece 2015).

As part of the Third Economic Adjustment Program in Greece, in October 2015, the ECB’s SSM carried out a comprehensive assessment of the four significant Greek banks using data from June 2015 under its direct supervisory remit. It included an asset quality review and stress test, examining a baseline and an adverse scenario. Following the assessment, the ECB required the banks to submit plans to cover their capital shortfalls (EC 2015a; EC 2015b; ECB 2015b).

On the other hand, the BoG conducted stress tests on those banks that were under its direct supervision within the SSM and imposed stricter management and reporting requirements on banks with regard to nonperforming loans (BoG 2016).

There do not appear to have been any additional conditions that banks had to comply with during the holiday. As part of the Third Economic Adjustment Program, the government agreed to not interfere with banks’ decision-making processes or board appointments (Andruszkiewicz et al. 2020; Piraeus 2015a).

The bank holiday lasted three weeks and the capital controls introduced with the holiday were gradually removed after the end of the holiday. Authorities initiated the holiday with the cabinet act of June 28, 2015, which was subsequently revised at the end of the holiday to make restrictions milder but leaving in place restrictions on cash withdrawals and transferring funds. Authorities were able to reopen the banks after the agreement for the Third Economic Adjustment was reached between the Greek authorities and the EU (Piraeus 2015a; Piraeus 2015b).

In May 2017, authorities published a conditions-based road map for lifting the remaining capital controls, which were then gradually lifted until they were completely lifted in September 2019 (Andruszkiewicz et al. 2020).

The holiday and capital controls were expected to have “limited and short-term negative effects” on the economy for several reasons: There was an increase in the number of bank notes in circulation in the Greek economy between November 2014 and June 2015; there were no restrictions on the amount of electronic transactions within the country; many companies were prepared for the possibility of capital controls, so the controls did not affect their operations; and there was a limited impact on tourism which had originally been a concern (Piraeus 2015a).

At the end of the bank holiday, Greece had reached an agreement on a Third Economic Adjustment Program with the EC. This agreement and the liquidity assistance measures provided by the Eurosystem helped offset the trend of deposit outflows that had begun in late December 2014 and lasted until the beginning of the bank holiday (Piraeus 2015b).

Research has not revealed regulatory changes following the bank holiday.