Greece’s central bank has moved to protect its banks from any fallout from the coming general election, asking the European Central Bank to approve a stand-by domestic emergency funding line, a Bank of Greece official said on Saturday.
“We have sent a request to the ECB on ELA approval for all four major banks to have a shield for the banking system,” the official said, declining to be named.
“It is up to each bank to decide whether it will use the funding line,” the official added, according to Reuters.
On Friday, two of the four systemic banks, Eurobank and Alpha Bank, confirmed that they had requested financial support from ELA via the Bank of Greece. According to the banks’ executives, Alpha Bank and Eurobank do not intend to make use of the funds that ELA would ensure for them in the future, as they have received funding guarantees from the ECB. The request was purely a precautionary measure due to the country’s current situation.
Receiving funding from ELA would mean that the banks would have to repay the loan with a 1.55% interest rate, a great increase compared to the 0.05% ECB interest rate.
The request for the inclusion of all four Greek systemic banks in ELA will be discussed at the ECB over the next week.
According to bank representatives, the request came as a precautionary measure in order for the banks to be able to face the current liquidity needs arising partly due to the relative and controlled deposit withdrawals, the participation of banks in Treasury bill issuing and the recent developments regarding the Swiss franc which caused trouble for more than 60,000 borrowers.
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