According to a report by Greece’s central bank released on Thursday, the lowering of the ELA cap is a result of improved liquidity conditions in Greek banks and the stabilization of private sector deposit flows. The ELA ceiling is valid until October 4.
The main source of Greek banks‘ liquidity since February 2015 has been emergency liquidity assistance, after they had been cut off from ECB funding. Borrowing from ELA is more costly than borrowing directly from the ECB, says a Reuters report.
After the completion of Greece’s first bailout program review in June, the ECB reinstated Greek banks’ access to cheap borrowing. This allowed lenders to reduce their dependence on ELA.