Bank of Greece asks ECB for extra cash flow via ELA
The Bank of Greece has submitted a request to the European Central Bank for the urgent supply of additional liquidity to the country’s lenders via the emergency liquidity assistance (ELA) mechanism to help them cope with the wave of deposit withdrawals, according to banking sources. The request will be discussed during a teleconference of ECB council members on Friday.
Meanwhile, Reuters reported that ECB officials on Thursday informed the Eurogroup meeting of eurozone finance ministers in Luxembourg of their concern over whether Greek banks will be able to open on Monday, although this information has not been confirmed.
The outflow of deposits on Thursday amounted to 1.2 billion euros due to worries generated by the impasse in the country’s negotiations with its creditors and statements by SYRIZA-led government officials about a rift with the creditors, or even a eurozone exit. The flight of deposits from the Greek system has reached 3 billion euros since the start of the week, which means that banks will not be able to respond to their clients’ needs for much longer.
Therefore, just 24 hours after Wednesday’s ECB board meeting that extended the ELA limit for Greek lenders by 1.1 billion euros to 84.1 billion, the Bank of Greece has heeded the call from commercial Greek lenders to ask the ECB for additional liquidity to keep the banking system going and serving the needs of Greek households and corporations.
Sources said that the BoG has asked for additional funding of 3.5 billion euros to cover the growing needs. Senior bank officials said they believed Frankfurt would approve the request, noting that the most likely scenario was that the ECB would continue to support the local credit system, at least for as long as there was still the prospect of an agreement between Athens and its creditors. They added that they did not even want to think about a negative response from the ECB, because given the very negative climate and widespread fears, it would be extremely difficult for banks to respond to their clients’ requirements.
On Thursday the heads of Greece’s four systemic banks met with Deputy Prime Minister Yiannis Dragasakis for an update on the course of the negotiations. Dragasakis reiterated his optimism about the outcome of the talks, estimating that the differences between the two sides were small and a deal would be reached soon. Discussions also focused on the state of the banks’ liquidity.
