Bloomberg News

Greece Will Increase Emergency Liquidity to Banks by 50%

March 09, 2012

Greece raised liquidity for its lenders by 50 percent or 30 billion euros ($40 billion) through the central bank’s Emergency Liquidity Assistance program.

The increased liquidity, which comes in the form of guarantees from the Bank of Greece, was passed by parliament in Athens yesterday and brings the total available under the ELA program to 90 billion euros.

The emergency liquidity is required because Greek banks are shut out of inter-bank lending markets due their high exposure to government debt, subject to a 53.5 percent reduction in its face value in the biggest restructuring in history. Greece’s Finance Ministry said today that 95.7 percent of the country’s debt will be included in the exchange after it triggers an option to force investors to take part.

The European Central Bank yesterday said it would resume accepting Greek debt as collateral as part of its credit operations. The ECB temporarily suspended accepting the debt as collateral on Feb. 28 after Standard & Poor’s cut Greece’s credit rating to “selective default.”

Greek banks relied on the ELA for 42.9 billion euros in November, while dependence on the ECB’s credit operations for liquidity was 73.4 billion euros.

To contact the reporter on this story: Antonis Galanopoulos in Athens at agalanopoulo@bloomberg.net

To contact the editor responsible for this story: Maria Petrakis at mpetrakis@bloomberg.net


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