The European Central Bank will allow Bank of Greece to provide as much as 59.5 billion euros in emergency funding for the country’s lenders, an ECB official familiar with the decision said in a Bloomberg report.
The measure is needed for Greece after the ECB decided not to accept Greek state bonds as collateral for funding on Wednesday over doubts that the newly elected government will conclude its bailout program.
The emergency funding aims at avoiding a crisis in Europe’s financial system and at the same time is a warning to Greek politicians to abide by euro zone rules, analysts say. The ECB approved 50 billion euros in emergency liquidity assistance as a replacement for its regular funding, plus an extra 9.5 billion euros, said the official said who preferred to remain anonymous, according to Bloomberg.
German newspaper Die Welt reported on Thursday that the ECB would allow the Greek central bank to offer about 60 billion euros in ELA.
According to the ELA measure, a nation’s central bank can provide liquidity to lenders at its own risk. The ECB will review ELA every two weeks to check whether the funds are being used appropriately and not in a way that will interfere with monetary policy.
Greece’s Finance Ministry said the ECB decision to do away with the waiver doesn’t reflect any negative developments in the country’s financial sector and that banks are “adequately capitalized and fully protected.” Greek deposits are safe, and the ECB move to lift the dispensation for junk-rated collateral for Greek banks is something that can be reversed, Bank of Greece governor Yannis Stournaras told reporters in Athens on Thursday.
ELA is priced at an annual interest rate of 1.55 percent compared with the current ECB refinancing rate of 0.05 percent, he said in an interview with Kathimerini newspaper in November.
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