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5 Feb 2015
Could the ECB prevent Greek banks from borrowing at the ELA? – BBH
FXStreet (Barcelona) - Marc Chandler, Global Head of Currency Strategy at BBH, comments that ECB can deny the Greek banks ELA borrowing if they suffer from a solvency rather than a liquidity issue, which might push Greece out of the Eurozone.
Key Quotes
“The ECB has used the ELA authorization to force its will on countries previously. It did so against Ireland, for example, in 2010. It actually denied a couple of Cypriot banks access to the ELA, and this forced a restructuring upon them.”
“Under some scenarios, the failure of the newly elected Greek government to reach a deal with its official creditors by the end of February could spur the ECB into deciding that Greek banks were suffering from a solvency issue and not a liquidity problem.”
“They could then decide (2/3 vote required) to deny the Greek central bank ELA authority.”
“This would trigger a deeper crisis and could be the push of Greece out of the eurozone.”
Key Quotes
“The ECB has used the ELA authorization to force its will on countries previously. It did so against Ireland, for example, in 2010. It actually denied a couple of Cypriot banks access to the ELA, and this forced a restructuring upon them.”
“Under some scenarios, the failure of the newly elected Greek government to reach a deal with its official creditors by the end of February could spur the ECB into deciding that Greek banks were suffering from a solvency issue and not a liquidity problem.”
“They could then decide (2/3 vote required) to deny the Greek central bank ELA authority.”
“This would trigger a deeper crisis and could be the push of Greece out of the eurozone.”