The European Central Bank (ECB) has finally announced its decision on the emergency support it provides to Greek banks.
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European Central Bank hits Greek banks with tougher haircuts
ECB has maintained the cap on emergency liquidity assistance (ELA) at €89bn, but crucially it has “adjusted” the haircuts it applies to the assets which Greek banks hand over in return for funds.
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In simple terms, the ECB is treating Greek government bonds as riskier, and valuing them as such when it calculates how much liquidity it can provide.
In what is described as another tightening of the screw on Greece, some banks may find it even tougher to qualify for emergency liquidity assistance.
Here is the full statement:
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ELA to Greek banks maintained
The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece.
ELA can only be provided against sufficient collateral.
The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in ELA relies to a significant extent on government-linked assets.
In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA.
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The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance and for the balance of risks to price stability in the euro area. The Governing Council is determined to use all the instruments available within its mandate.
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