Increased liquidity requirements amid the coronavirus pandemic contributed toward the increase in Greek bank’ dependence on European Central Bank funding.
In April, local credit institutions drew 9.2 billion euros from the ECB, according to the monthly accounting report from Frankfurt. It is reminded that to prevent credit crunch conditions, the ECB has restored the waiver on Greek state bonds, thereby accepting them as collateral despite their low credit rating.
Greek lenders’ total dependence on liquidity from the Eurosystem came to €21.5 billion at end-April, from €12.35 billion in March and €7.6 billion in February. Their Eurosystem funding had remained stable at February’s level for a quite long period.
Borrowing from the ECB took place through the Long-Term Refinancing Operations (LTRO) mechanism, concerning long-term loans the ECB offers to commercial banks in the Eurosystem with low interest. The trebling of Greek banks’ borrowing is associated with the ECB’s waiver decision, otherwise domestic lenders would have once again needed to resort to the emergency liquidity assistance (ELA) mechanism.