A drop in Greek bank shares was caused by external factors, not the health of the country’s banks, the governor of the Bank of Greece said on Wednesday.
Greek banking stocks have lost more than 40 percent so far this year, and the selling pressure grew in recent days. Analysts blamed the European Union’s conflict with Italy over its proposed budget.
“The recent stock market developments in respect to the banking sector are not related to the soundness of Greek banks and are due to purely exogenous factors,” Yannis Stournaras, the head of the Greek central bank, said in a statement.
Those factors include rising interest rates generally and in Greece’s neighboring countries in particular.
“The ongoing improvement of the liquidity situation of Greek banks reflects the improved condition of the Greek financial system,” Stournaras said.
On Wednesday, the European Central Bank lowered the ceiling on the emergency liquidity assistance – funds that Greek banks draw from the domestic central bank – by 200 million euros to 5.0 billion euros (4.4 billion pounds).
The move reflected improved liquidity, taking into account private-sector deposit flows and banks’ access to financial markets, it said. The new ceiling is valid through to Nov 7.
Greek banks have relied on emergency liquidity assistance since February 2015 after being cut off from the ECB’s funding window. Emergency funding is more costly than borrowing directly from the ECB.
In June 2016, the ECB reinstated Greek banks’ access to its cheap funding operations, allowing lenders to reduce their dependence on the emergency liquidity lifeline.
But since Athens emerged from its bailout program on Aug. 21, the ECB has ended a waiver that made Greek government bonds eligible collateral for its cheap funding.