ECONOMY

Annual cost of ELA use seen at 600 mln

Domestic banks calculate the cost of having been forced to rely on emergency liquidity assistance (ELA) from the Bank of Greece at 600 million euros per year. This dependence came as a result of the European Central Bank’s decision to stop accepting Greek bonds as collateral for liquidity, which came into force on Wednesday.

Half of the 80 billion in cash which Greek banks have drawn from the Eurosystem is now owed to the BoG through the ELA scheme, while the other half has been drawn using the bonds of the European Financial Stability Facility (EFSF) that local banks hold and the ECB accepts as collateral.

The additional cost is due to the increase in the interest rate by 150 basis points, as ELA charges a 1.55 percent rate against the negligible 0.05 percent rate charged by the ECB for the supply of liquidity.