A successful completion of a first review of the Greek programme will have a series of positive developments which will significantly reduce borrowing cost for Greek banks, Yiannis Stournaras, Bank of Greece governor said on Wednesday.
Addressing an event organized by the graduates of London Business School and Stanford Club in Athens, the Greek central banker underlined that with a successful completion of the first review, a series of benefits could arise for the banking system, such as restoring a waiver on Greek bonds by the European Central Bank, allowing Greek state bonds to be accepted as collateral in refinancing transactions in the Eurosystem. Additionally, Greek banks are expected to participate in a new funding tool offered by ECB, offering long-term refinancing (TLTRO). These developments, combined will significantly reduce funding costs for Greek banks, he stressed, adding that Greek bonds could become eligible for ECB’s QE programme.
Stournaras said that a decline in bond yield spreads (yield difference between Greek and German benchmark bonds) will positively affect the banking system as the borrowing cost for the state determines largely the interest rate in the money market.
“However, there is no room for complacency. The system continues facing challenges, as macro-economic environment remains fragile, limitation in capital movements (capital controls) remain valid and the market is characterized as largely unstable,” Stournaras said.