Greece's central bank has activated an emergency liquidity assistance scheme so that it is available if banks need to draw from it, the Greek financial daily Imerisia said today.
The Emergency Liquidity Assistance (ELA) is one of the options the euro zone has at its disposal to keep Greek banks afloat if the country's sovereign debt is pushed into default by a new bail-out deal that was put together by EU leaders last month, and the ECB stops accepting it as collateral.
The ELA has already been activated through the Bank of Greece. 'All small, medium and large banks (except for National Bank of Greece) have stated they will participate, in order to be able to draw funds if and when they need them,' the newspaper said without mentionning its source.
The Greek central bank declined to comment on the report.
Rising bad loans, sovereign debt downgrades, deposit outflows and a deepening recession have taken their toll on Greek banks, which also stand to suffer write-downs from a bond swap deal that is part of the country's second rescue package.
ECB emergency funding to Greek banks stood at €103 billion at the end of June, showing that the banks have been cut off from borrowing from other European lenders on the interbank market.
The ELA is effectively emergency loans given by euro zone national central banks to strapped commercial banks. The ECB defines it as support given by central banks in 'exceptional circumstances and on a case-by-case basis to temporarily illiquid institutions and markets'.
The loans are given at the discretion of the national central bank although they have to be rubber stamped by the ECB.
Finance Minister Evangelos Venizelos said yesterday that a separate €10 billion euro Financial Stability Fund set up to recapitalise Greek lenders in case of need can inject capital by buying common shares issued by the banks.
Separately, the International Monetary Fund said today that Greece may get the next tranche of its bail-out financing by end-September.
‘The IMF executive board could be in position to consider approval of the next disbursement towards the end of September,’ IMF spokesman David Hawley said at a news briefing.
