The market is banking on the European Central Bank extending beyond June 2022 a decision rendering Greek state bonds eligible as collateral for Eurosystem transactions despite not being at investment grade.
Passed in April 2020 as a temporary measure due to the pandemic, the waiver is due to expire next June, but the general consensus is that it will be extended at the ECB meeting in December. This is also one of the key objectives of the Finance Ministry and the Public Debt Management Agency.
According to central banker Yannis Stournaras, who is also an ECB Governing Council member, Frankfurt will not take a tough stance toward Greece over the waiver. Speaking to Kathimerini, he says that just as the ECB will continue to buy Greek bonds through the PEPP, so it will insist on the waiver. “The two go together,” he says, adding that the extension beyond June “is important for Greek banks as it concerns the smooth implementation of monetary policy.”
Most analysts also expect the extension of the waiver. “We believe it is possible, given that a potential extension of the waiver would be important for Greece’s smooth transition into the asset purchasing program, and in order to avoid any repercussions from the conclusion of the pandemic emergency purchase program (PEPP),” Nondas Nicolaides, vice president and senior credit officer at Moody’s Investors Service, tells Kathimerini. “In the more unlikely event that the ECB chooses a hard line stance, then the above funding options would be available to Greek banks.”
Cristina Torrella, senior director on, financial institutions at Fitch Ratings is more cautious. “We believe that support from ECB for European sovereign and banks, including Greek, will be gradually removed to avoid any cliff effects. Greek banks are indeed benefitting from funding from ECB (in particular, the TLTRO-III) and its liquidity position is also supported by the waiver on government bonds,” she says.
“However, we also acknowledge that the banks’ funding and liquidity profiles have improved in recent years, supported by structural growth in deposits and better access to markets. Also, the Greek banks need to build large amounts of unsecured debt in the next years in order to meet the resolution requirements (i.e. MREL),” notes Torrella.