ECB cuts Greek banks fund­ing as liq­uid­ity im­proves

The Pak Banker - - FRONT PAGE -

The Euro­pean Cen­tral Bank cut emer­gency liq­uid­ity as­sis­tance (ELA) for Greek banks on Tues­day, in line with a re­quest from Athens, sev­eral sources said, a pos­i­tive sign that lenders are sta­bi­liz­ing their oper­a­tions and build­ing cash re­serves.

The ECB cut the ELA ceil­ing to 89.7 bil­lion eu­ros ($98.96 bil­lion) from around 91 bil­lion eu­ros, re­flect­ing a grow­ing liq­uid­ity buf­fer and in­creas­ing con­fi­dence af­ter Greece wrapped up ne­go­ti­a­tions with cred­i­tors on a bailout pack­age worth around 85 bil­lion eu­ros last week. "The ELA cap was low­ered, in line with a re­quest by the Bank of Greece, due to im­prov­ing liq­uid­ity con­di­tions," one of the sources told Reuters, speak­ing on con­di­tion of anonymity.

Greece has re­lied on ELA for months to keep its banks func­tion­ing, while also in­tro­duc­ing cap­i­tal con­trols and lim­it­ing cash with­drawals. But banks ear­lier re­ported a liq­uid­ity buf­fer of around 5 bil­lion eu­ros, thanks to pre­vi­ous ELA in­creases, tax and tourism in­flows, pen­sion pay­ments and the sta­bi­liz­ing ef­fect of cap­i­tal con­trols.

In­ter­na­tional lenders ear­marked 25 bil­lion eu­ros in the res­cue pack­age to re­cap­i­tal­ize Greek banks but lenders will have to wait for fresh eq­uity un­til af­ter author­i­ties fin­ish a stress test in Oc­to­ber and ap­prove busi­ness their busi­ness plan. The cap­i­tal in­jec­tion, though not im­me­di­ate, is ex­pected to hap­pen be­fore the end of the year.

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