ECONOMY

ELA grows but the credit system is facing the ultimate stress test

Liquidity in the domestic credit system has reached its worst point as bankers consider the 1.1-billion-euro increase in the limit of the emergency liquidity assistance (ELA) granted on Wednesday by the European Central Bank to be insufficient to satisfy the local system’s requirements.

Bank officials estimate that the level of deposit outflows on Wednesday alone amounted to 950 million euros, following a total of over 800 million euros that came out of bank accounts on Monday and Tuesday on fears of a rift between Athens and its creditors. They add that if the flight continues at the same rate, it is doubtful whether the banking system will be able to meet the demand for cash.

Wednesday’s ECB board meeting took place in a particularly heavy atmosphere due to the impasse in negotiations and the aggressive rhetoric by the SYRIZA-led government and several European officials. Again there was an lengthy discussion over a possible increase in the haircut on Greek banks’ collateral used for drawing liquidity, but no decision was reached.

However, banking sources note that time is running out, with Greece threatening to abandon its obligations to the International Monetary Fund, meaning that the time for the ECB to take decisive action is coming ever closer.

Greek banks have been particularly concerned about the imposition of capital controls for several days due to the speed of the cash outflow and Frankfurt’s increasing reluctance to keep the funding line intact given the problems in finding a solution in the negotiations. In fact, sources say that the government and the Bank of Greece have completed the technical procedure for the imposition of capital controls if they have to. Bank officials tell Kathimerini that the risk of capital controls is growing with every day that goes by without an agreement.

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