European Central Bank approves emergency funds for Greek banks

FRANKFURT, Germany – The European Central Bank has given the green light to make up to 60 billion euros ($68.5 billion) in emergency liquidity available to Greek banks, a source close to a national central bank told Agence France-Presse on  on February 5.

The source confirmed a corresponding report in the daily Die Welt.

The day before, the ECB had effectively shut off Greek banks from another key channel of financing by saying it would no longer accept Greek sovereign bonds as collateral for loans in its normal refinancing operations.

Greek debt has a junk credit rating and, under ECB rules, should not qualify as collateral for loans.

But Athens had been granted a special waiver to that that rule as long as it was deemed to be in compliance with the terms of its 240-billion-euro ($270 billion) EU-IMF bailout.

In a shock decision on Wednesday, the ECB announced it would now lift that waiver.

The move was seen as a severe blow to Greece and sent the Greek stock market into a tailspin and Greek borrowing costs soaring.

Nevertheless, analysts insisted that the ECB’s would not push Greek banks into a liquidity crisis, since they had reduced their exposure to Greek government bonds and had other investment-grade assets which they could use as collateral instead.

In addition, Greek banks could also call on the emergency liquidity assistance (ELA) facility available under eurozone rules. – Rappler.com