ELA liquidity for Greek banks even after Feb 28

A process of approving ELA by the European Central Bank has not changed since 2012 when Greek banks first resorted to the mechanism, the source said.

In any case, the emergency liquidity mechanism refers to credit institutions of a country, which in the case of Greece have been recently assessed through a stress test procedure. Greek banks borrowed as much as 120 billion euros early in 2012 from ELA but brought this number to zero by mid-2014 after the ECB began accepting Greek bonds as collateral for the refinance of domestic credit institutions. Cypriot banks are currently using the same process.

Late on Wednesday, Bank of Greece sources said that ECB approved a demand to offer liquidity to Greek banks because of an outflow of deposits from the banking system. Greek banks, no longer have adequate collateral to cover the gap created by the outflow of deposits with ECB funding, leading them to the emergency liquidity assistance mechanism. National Bank, however, said that the bank had adequate collateral to drain up to 4.0 billion euros directly from ECB.

ECB's approval covers a period of two weeks, according to ECB's regulations. Greek authorities will have to use the same procedure for any additional liquidity after 15 days. ELA offers liquidity at a higher interest rate compared with liquidity offered directly by ECB.