BLBG: ECB Plans to Push Greek Banks to Shed State Debt If Talks Fail
(Bloomberg) -- The European Central Bank intends to tell Greek banks to reduce their holdings of state debt if talks over the country’s finances break down, three people familiar with the discussions said.
The ECB’s Supervisory Board, in charge of bank oversight across the euro area since November, is concerned that Greek lenders will be saddled with illiquid assets from a government heading for default. The board’s actions are contingent on progress at a meeting of euro-area finance ministers that starts on Friday, the people said, asking not to be named as the matter is private. An ECB spokesman declined to comment.
Ministers are trying to reach a compromise between the Greek government’s request for a six-month loan extension with fewer conditions and its creditors’ demands that it meet the terms of its existing 240 billion-euro ($273 billion) bailout. Daniele Nouy, the ECB’s top supervisor, wrote to the country’s lenders last month urging them not to increase their exposure to the state by buying more short-term bonds, given the uncertainty over Greece’s place in the currency bloc.
Greek banks are key buyers of the nation’s short-term treasury bills. The government has 4.4 billion euros of bills maturing in March and 2.4 billion euros expiring in April, according to data compiled by Bloomberg. The SSM could insist that banks don’t roll some or all of that debt over if there’s a political impasse.
The ECB also turned up the pressure on the Greek government on Wednesday by approving less than the full amount of Emergency Liquidity Assistance requested by the country’s central bank. Policy makers raised the limit for the funds to 68.3 billion euros from 65 billion euros. ECB policy states that ELA is only provided for solvent banks to cover temporary liquidity shortages.
To contact the reporters on this story: Jeff Black in Frankfurt at jblack25@bloomberg.net; Alessandro Speciale in Frankfurt at aspeciale@bloomberg.net
To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Paul Gordon, Ben Sills
