Back in April, we noted that central banks in Bulgaria, Cyprus, Albania, Romania, Serbia, Turkey and Macedonia had all effectively moved to quarantine Greece, as it became increasingly apparent that negotiations between Athens and the troika were set to deteriorate ahead of a €750 million payment due to the IMF on May 12. 

As Kathimerini reported at the time, subsidiaries of Greek banks in Eastern Europe were told to cut exposure to “Greek bonds, T-bills, deposits in Greek banks and/or interbank funding,” in an effort to assuage concerns that any contagion from a collapse of the Greek banking sector could imperil local lenders. 

A little over two months later, Greek banks are paralyzed, having lost access to emergency central bank liquidity on the heels of PM Alexis Tsipras’ decision to put euro membership to a popular vote.

Now, bond yields indicate investors are getting nervous about the possibility that the drama in Greece could spill over into the banking sectors of Bulgaria, Romania, and Serbia where Greek banks control a substantial percentage of total banking assets:

Despite what certainly appears to be souring investor sentiment, depositors seem to be safe -- for now. Reuters has more:

Petar Bakhchevanov withdrew some cash from an ATM in Bulgaria's capital on Monday as a test to make sure the deepening debt crisis in neighboring Greece had not spread to the Greek-owned bank where he keeps his savings.

Millions of people in ex-Communist Bulgaria, Macedonia, Albania, Serbia and Romania have deposits in banks owned by Greek lenders, putting this corner of south-eastern Europe in the frontline if there is contagion from the Greek crisis.

Central banks in Macedonia and Serbia introduced extra restrictions on the movement of capital between local subsidiaries and their Greek parents, saying the were taking precautions against any spillover from Athens.

"After watching the news on TV, I just wanted to check if everything is okay and I can withdraw money from my account," said Bakhchevanov, outside a branch of Piraeus Bank Bulgaria, a subsidiary of Greece's Piraeus bank (BOPr.AT).

Bakchevanov was able to get at his money. He took out 100 Bulgarian levs, or around $50, from the ATM, and went inside the branch where he said bank staff had reassured him he did not need to worry about his deposit.

However, as Reuters goes on to note, there are reasons to be concerned, because with "Greek banks owning 20 percent of the banking sector in some countries the exposure is real, and the region's economies have historically been fragile, so it would not take a lot to push them into crisis too."

Here's what Morgan Stanley had to say last month about possible contagion:

The risk is that depositors who have their money in Greek subsidiaries in Bulgaria, Romania and Serbia could suffer a confidence crisis and seek to withdraw their deposits. Although well capitalised and liquid (as highlighted for Romania by the NBR’s Financial Stability Report (2013)), Greek subsidiaries in the SEE region may see difficulties providing enough cash if withdrawals are intense and become problematic. In case of a liquidity shortage, Greek subsidiaries in Bulgaria, Romania and Serbia would probably create the need for local authorities to step in. Local central banks and governments would most probably provide additional liquidity, but if panic behaviour develops it would mean that certain banks would either have to find a buyer or be nationalised. In this case, the national deposit guarantee schemes will have to repay guaranteed deposits and, in case of insufficient funds, the government will have to provide them. 

Deposits in Greek subsidiaries which would be at risk of being withdrawn in Bulgaria, Romania and Serbia amount to 14.8%, 4.1% and 6.8% of GDP, respectively. Even if we take into account that not all of them are covered by the local guarantee schemes as the individual amounts could exceed the legal limit of €100,000, the deposits at risk remain significant. Thus, a potential bank run on Greek banks in the region would have a significant negative impact on local governments’ fiscal deficit and their debt. Moreover, potential losses incurred from depositors would have a negative impact on consumption and growth in the region.

Deposit run: Most immediate of the bear case risks for Greek bank subsidiaries in the SEE region is the potential for sizeable deposit outflows, and we can look to Greece’s own precedent, where c.€35 billion deposits are reported to have left the system (c.21% of the total). In Bulgaria, Romania and Serbia, this risk is particularly relevant, given that the existing funding gap is already high. On average, loan/deposit ratios at Greek banks are 107% in Bulgaria, 154% in Romania and 121% in Serbia. Should deposit outflows materialise in these countries, ultimately we are looking at a combined €15 billion of funding that could be withdrawn. Yet, a potential mitigation of risk is that a large proportion of deposits are protected by guarantee funds, and we can look to the example of Bulgaria, where 72% of deposits are insured.

And while it seems, based on what Mr. Petar Bakhchevanov told Reuters (see above), that all is currently quiet on the Eastern front (at least as it relates to Grexit-induced bank runs), nobody is out of the woods yet, as it is still far from clear what happens next, especially now that the ECB is set to review "all legal aspects" of ELA following the Greek default which will occur at midnight on Tuesday. And with that, we'll close with the following quote from Peter Andronov, the chairman of the Association of Bulgarian Banks:

 “If everything is messed up in Greece, you never know what madness this could create."

Here's a summary from Reuters regarding each country's proported exposure/contagion risk:

BULGARIA

* Greek-owned banks make up a fifth of the Bulgarian banking system. These include Bulgaria's fourth largest lender United Bulgarian Bank, owned by National Bank of Greece, and Postbank, Bulgaria's fifth largest lender, controlled by Greek Eurobank. Number 9 bank Piraeus Bank Bulgaria is controlled by Piraeus Bank of Greece and Alpha Bank is a direct bank unit of Greece's Alpha Bank.

* Bulgaria's central bank, in a statement issued on Monday, said it had measures in place to insulate Greek-owned banks from contagion. It said they are financially independent from their parents, they hold no Greek government securities, and have a capital adequacy and liquidity level higher than the average for banks in Bulgaria. "Any action by the Greek government and the central bank to impose measures in the Greek financial system have no legal force in Bulgaria and can in no way affect the smooth functioning and stability of the Bulgarian banking system," the central bank said.

* A spokeswoman for United Bulgarian Bank said on Monday: "We are doing business as usual ... We reconfirm and fully agree with the central bank statement from this morning."

* In a statement, Piraeus Bank Bulgaria said the capital controls in Greece are not affecting its operations, outlining that such restrictions do not have legal force in Bulgaria and pointing out that the bank has no exposure to the Greek banking system or Greek treasuries and bonds. "For us, this Monday is a normal working day," the bank said in the statement. "Piraeus Bank Bulgaria continues with its usual work on extending loans, raising deposits.and other banking activities as it has done since it stepped on the local market," the statement said.

ROMANIA

* There are four banks with Greek majority capital operating in Romania: Alpha Bank Romania, Piraeus Bank, Bancpost, controlled by Eurobank Ergasias, and Banca Romaneasca, controlled by National Bank of Greece. Together they account for 12 percent of total banking assets in Romania.

* The central bank has said the Greek subsidiaries in Romania are well capitalised and latest data showed their average capital ratio is slightly above 17 percent - in excess of the 10 percent capital ratio requirement set by the regulator. They also have amassed robust portfolios of state securities which entitles them to resort to funding from the central bank if needed.

* Piraeus Bank Romania said in a statement on Monday: "Piraeus Bank Romania is a local subsidiary, a Romanian bank with Greek capital. All operations are localized and integrated into the Romanian banking market policies, regulated by the Romanian central bank...There are no capital control policies enforced, banks are not closed, nor are operations limited."

ALBANIA

* There are three Greek-owned banks in Albania: subsidiaries of National Bank of Greece, Piraeus Tirana Bank, and Alpha Bank. Their share of the total assets of the banking sector in Albania is 15.9 percent, down from 20 percent in 2010, Klodi Shehu, director of the financial stability department at the Albanian central bank, told Reuters.

* Shehu said the central bank imposed minimum capital adequacy ratios for Greek-owned banks of 14 percent, above the 12 percent required for other banks. The three Greek-owned banks have a capital adequacy ratio of more than 17 percent.

* "These banks are well-capitalized, liquid and capable of timely payments irrespective of what happens in Greece," Shehu told Reuters.

MACEDONIA

* Macedonia has two Greek-owned banks which together hold more than 20 percent of total banking sector assets. They are Alpha Bank AD Skopje, a subsidiary of Alpha Bank, and Stopanska Banka AD Skopje, owned by National Bank of Greece.

* On Sunday, the Macedonian central bank ordered its lenders to pull their deposits from Greek banks and it imposed temporary preventive measures to stop an outflow of capital from Macedonian subsidiaries to parent banks in Greece. It said the capital limits apply to future transactions, not to arrangements already in place.

* Under Macedonian law, the Greek parents have no way to withdraw their founding capital beyond 10 percent, unless they sell their holding to another investor.

* An official at the Macedonian central bank, who declined to be named, told Reuters that several months ago the bank instructed Greek-owned banks to provide daily reports on transactions with their parent banks as a precaution.

* In an analysis of the possible worst-case scenario, with Greek-owned banks collapsing under the weight of deposit withdrawals, Standard Bank estimated that the Macedonian government would have to come up with 250 million euros, or around three percent of gross domestic product, to fully recapitalize the banks, "something that the sovereign can live with."

SERBIA

* In Serbia, four Greek-owned banks hold around $4 billion worth of assets, or 14 percent of total banking assets. They are Alpha Bank, EUROBANK EFG, Piraeus Bank and Vojvodjanska Banka, part of the National Bank of Greece group.

* In a written answer to Reuters questions, Serbia's central bank said it had in place "an elevated level of monitoring of businesses of four Greek-owned banks, especially their liquidity, their relations with parents groups and events in international markets related to Greek banks and their subsidiaries."

* The bank said that "daily reports" provided by the Greek-owned banks showed no increased outflow of funds to mother banks nor a significant outflow of savings. The bank said Greek subsidiaries are not branch offices but separate legal entities, and that there were strict limits on shareholders repatriating capital assets of the subsidiaries.

* "The central bank will continue to monitor banks in Greek ownership and if necessary will undertake other measures under its mandate to prevent a potential negative influence on Serbia's banking sector," the bank said.

* "We have to wait and see what will happen in the next seven days. One thing is sure, banks in Greece will be in some kind of hibernation in the next 10 days given that Greece introduced capital controls. Most Greek banks that operate in Serbia are self-funded and well capitalised, so I don't expect to see any problems in the short run," said Branko Srdanovic of the Belgrade-based consultancy Associates Treasury Solutions.