European Central Bank to decide on ELA application by Greek banks

The board of the European Central Bank will convene on Wednesday in order to decide upon the “precautionary” application of…

The board of the European Central Bank will convene on Wednesday in order to decide upon the “precautionary” application of the four systemic banks in Greece for ELA cover. The Governor of the Bank of Greece Yannis Stournaras will be present at the meeting to support the Greek application and to inform the ECB on recent developments in the Greek economy.

While only two of the systemic banks – Alpha Bank and Eurobank – requested the help from the Emergency Liquidity Assistance mechanism, the Bank of Greece decided to ask assistance for all four banks, fearing a potential capital flight and repercussions from the recent development with the Swiss franc.

The Bank of Greece first appealed to the ELA for liquidity assistance in August 2011 and by July 2012 had provided about 123 billion euros. By April 2014 though, the Greek banks managed to primarily cover their liquidity needs with funding received from the credit markets.

The ELA is provided to a solvent financial institution, or group of solvent financial institutions, that is facing temporary liquidity problems, without such operation being part of the single monetary policy.

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