Greek banks have been shut off from regular ECB liquidity operations due to lack of sufficient collateral. Today the Banks have that collateral thanks to a disbursement of funds from the EFSF which in turn will be used as collateral for more loans from the ECB.
If this makes little sense to you it is because it should not make any sense to anyone. It is another act of desperation in a long line of desperate acts.
Please consider Greek banks receive €18bn transfer
Greece’s four largest banks received a €18bn transfer on Monday as the first instalment of a recapitalisation plan agreed as part of the country’s second bailout by the EU and the International Monetary Fund.Anyone who thinks this will stop outflows has holes in the head. As I see it, it will allow a means of additional outflows.
The funding, in bonds issued by the European Financial Stability Facility, will help banks reduce their dependence on emergency liquidity assistance, a temporary lifeline provided by the Greek central bank after they were excluded from European Central Bank liquidity operations this month.
The four banks are now expected to regain access to the ECB’s liquidity operations, using the bonds as collateral for funding at cheaper rates than under the emergency liquidity arrangement.
Bankers said they hoped the funding would help stem a continuing outflow of deposits since an inconclusive general election on May 6 triggered fears that Greece would soon be forced to leave the eurozone.
Mike "Mish" Shedlock
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