The European Central Bank (ECB) has extended on Wednesday the access of Greek banks to the mechanism of emergency loans, which has been a lifeline for the Greek banking sector, increasing the ceiling to 68 300 million euros. The information was released by the French news agency (AFP), quoting a source in the banking sector.
“The increase was approved,” said AFP a source close to the case, stating that it was also decided to increase the maximum limit for grant ing emergency loans (ALS) to Greek banks to 68.3 billion euros. The same information was advanced by Reuters, citing a source close to the ECB.
These loans have functioned as a ‘parachute’ for Greek banks, plagued by liquidity problems, while negotiations continue between Athens and creditors about sovereign debt.
ECB announcement appears on the eve of an anticipated request from Greece for the extension to six months of a loan agreement with the European partners not involving restrictions a complete back program.
Two weeks ago, the ECB closed a fundamental way for Greek banks finance themselves by refusing to accept Greek sovereign bonds as collateral for loans made along the normal lines Frankfurt funding .
As the Greek public debt is in the ‘junk’ level assigned by the international rating agencies, the ECB’s rules dictate the impossibility of this serve as collateral, though, as Athens was subject to a program redemption of EUR 240 billion (European Union and International Monetary Fund), the country benefited from exceptional arrangements.
Now, with limited access to emergency loans (ALS), Greek banks saw the rise of financing costs and is the Greek central bank which may support possible losses.
The ECB will meet again within two weeks to re-examine the support for molds to Greek banks through of ALS.
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