The Bank of Greece on Thursday announced a drastic reduction in the Emergency Liquidity Assistance (ELA) ceiling for Greek banks by 7.0 billion euros over the next two weeks, saying that this was in part due to returning deposits rather than the ECB's decision to reinstate a waiver for Greek bonds.
According to the central bank announcement, the Governing Council of the ECB did not object to its request an ELA-ceiling for Greek banks of 65.0 billion euros (down from 68 billion euros), up to and including next Wednesday and to a further lowered ELA-ceiling for Greek banks of 61.1 billion euros from June 30 to July 2016 6.
"The overall reduction of 7.0 billion euros in the ceiling reflects an improvement of the liquidity situation of Greek banks, amid a reduction of uncertainty and the stabilisation of private sector deposits flows, the progress achieved in the restructuring of Greek banks, as well as the impact of the reinstatement of the waiver," the bank said.
The first 3.0 billion euros in the ELA reduction is not a result of the reinstatement of the waiver, which comes into effect from June 29. The waiver allows the ECB to make an exception and accept Greek state bonds as collateral in order to lend to Greek banks at cheaper rates.
According to sources, it reflects a return of some 2.0-2.5 billion euros in deposits since early May and the first 10 days of June, significantly reducing the dependence of Greek banks on liquidity provided by the eurosystem (ECB and ELA). The second reduction from the following week factors in the effects of reinstating the waiver.