ECB maintains liquidity aid but tightens conditions for Greek banks

The European Central Bank on Monday decided to maintain the emergency liquidity assistance (ELA) lifeline to Greek banks, but made it harder for them to access the funds. The ECB's governing council held a telephone conference call Monday evening on Greece's cash crisis after Greek voters rejected further austerity measures in a bailout referendum Sunday. "The Governing Council of the European Central Bank decided today to maintain the provision of emergency liquidity assistance (ELA) to Greek banks at the level decided on 26 June 2015 after discussing a proposal from the Bank of Greece," the Frankfurt-based bank said in a statement. At the same time, the eurozone central bank also noted that ELA can only be provided against sufficient collateral, putting more pressure on the debt-wracked country by tightening collateral terms. "The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in Emergency Liquidity Assistance relies to a significant extent on government-linked assets," the ECB said. "In this context, the Governing Council decided today to adjust the haircuts on collateral accepted by the Bank of Greece for ELA," the statement said, a move that will make it more difficult to access ELA funds in the future. The ECB was "closely monitoring the situation in financial markets" and any impact on "the balance of risks to price stability in the euro area," the statement added. ELA is currently the only source of financing for Greek banks, and therefore the Greek economy. Bloomberg News cited a Greek official, speaking on condition of anonymity because the matter is confidential, as saying that Greek banks can cope with the new terms and the ECB didn't impose a hard deadline on the country. The ECB will review its decision on Wednesday, the official told Bloomberg, the day after an emergency summit of eurozone leaders on the Greek crisis in Brussels.