By Balazs Koranyi and George Georgiopoulos
Greek banks could get access to cheap European Central Bank funding again soon after Athens clinches a deal with creditors, sources told Reuters, bringing relief to troubled lenders after almost a year on an expensive liquidity lifeline.
Once Greece wraps up talks with international creditors, the ECB could waive its minimum credit rating requirement on Greek debt within days or weeks, two sources said.
The previous waiver was ditched last year when Greece almost tumbled out of the euro zone, refusing to meet its bailout commitments, exacerbating its debt crisis.
A renewed waiver, meanwhile, would also make Greek bonds eligible for the ECB’s quantitative easing programme, an €80bn per-month hallmark asset buying scheme, the sources said.
However, Athens would need to pass a debt sustainability review before any actual purchases, they said.
Although the ECB normally requires investment grade credit rating to be in quantitative easing, countries in formal bailout programmes can receive an exemption from this requirement.
“The waiver would reduce banks’ reliance on (higher costing) Emergency Liquidity Assistance (ELA), make them eligible for some ECB funding, improve their balance sheet and impact confidence,” one of the sources, who declined to be named, said.
With the renewed waiver, Greek banks would be able to borrow at an interest rate currently at zero at the ECB’s weekly auction, an immediate boost to the banks’ balance sheets, even if only part of the nearly €70bn in ELA is converted to normal ECB funding.
The exact details of ELA are not published but the average interest rate charged on it is estimated to be around 100 to 150 basis points above the ECB’s benchmark interest rate.
Greece has been negotiating a deal with its international lenders for months on unlocking a new tranche of its €86bn bailout. Negotiations appear to have made significant progress last week and Jeroen Dijsselbloem, the chairman of euro zone finance ministers said a deal was close.
The swift end of the review is far from certain, however after months of delays. Seeking to meet creditor demand, Greece offered on Tuesday to automatically cut spending if bailout targets are missed.
Even if Greek government debt is included in quantitative easing, the ECB could only buy small amounts, less than €3bn, given various eligibility requirements.
That figure could rise after July, when Greece is due to repay the ECB about €2.3bn worth of bonds.