Emergency liquidity assistance stabilised for Greece

Emergency liquidity assistance frozen for Greece

The European Central Bank announced this week that the amount of emergency liquidity assistance (ELA) given to Greek banks would remain the same, despite the country’s current circumstances.

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,” the statement said.

According to the statement, these cuts on collateral mean that extra ELA cannot be given to Greek banks because it relies on government-linked assets. “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,” said the statement.

Alongside this, the governing council also decided to increase the haircut, the difference between the market value of an asset used as loan collateral and the amount of the loan, to 45%, according to Bloomberg. The ECB have also maintained the Greek bank Emergency Funding Assistance at €89 billion after being increased two weeks ago, as reported in City AM.

The Financial Times reported that some finance ministers wanted stronger measures to be put in place, but Prime Minister Alexis Tsipras is adamant that the “no” vote is best for Greece.

This week, Eurozone officials are expected to meet to decide the next steps for the Greek economy.