Since the summer of 2015, when capital controls were imposed, Greek banks are drawing 70 billion euros less from the ECB’s Emergency Liquidity Assistance programme, a development that is indicative of the banks’ improving funding profile over the last two-and-a-half years.
That performance is the result of the last recapitalisation of banks, the revival of the waiver that permitted direct borrowing from the ECB, the sale of banks’ subsidiaries both domestically and abroad that offered liquidity, the continued reduction of remaining loans, recent bond issues and a small increase in deposits.
In 2017 alone, ELA funding decreased by 25 billion euros, to slightly under 20 billion, and some banks are planning to do away with it entirely this year.
Banking sources say that entirely weaning off banks from the ELA programme will not be an easy matter from now on.
One reason is that the sell-off of subsidiaries is almost complete, and banks have maximally exploited both the ESM bonds that they received in the 2015 recaps and the waiver programme.
Hence, the further reduction of the ELA will depend on the return of deposits and on the efforts to return to the markets with new bond issues.
This will require a continued economic climate upturn and the successful completion of the current bailout memorandum in August, along with an agreement of the form of post-bailout financial supervision and support.
Even under a best case scenario, bond issues will depend on the climate in international markets
If the bailout ends without the establishment of an emergency credit line, that could lead to the abolition of the waiver, which allows Greek banks to borrow from the ECB with Greek bonds as collateral.
