Three days after upgrading Greece’s sovereign credit rating from ‘B’ to ‘B (high)’ with a Positive outlook, Canada-based ratings agency DBRS stated on Monday that there is a possibility that the European Central Bank’s waiver to the rule for not accepting junk-rated bonds as collateral might be prolonged for Greece after the end of its bailout program thanks to the increased monitoring planned.
However if that is not the case commercial banks in Greece may well have to resort to the expensive emergency liquidity mechanism to make up for the loss of cheap cash flow from Frankfurt, warned DBRS.
“The banking system is improving. The waiver related to the use of Greek bonds as collateral for financing operations with the ECB is to be reviewed by the end of the program in August. Estimates suggest that if it is withdrawn, banks should fill the gap with repatriating deposits, secured interbank funding, or if necessary, with more expensive ELA.
“It is possible that the enhanced surveillance to be put in place for monitoring the economic, fiscal and financial situation in Greece will support a decision on the continuation of the waiver,” read the DBRS statement.