Eurozone Accepts Greek Government Bonds as Collateral



Greece welcomed a decision by the European Central Bank on Tuesday to accept Greek government bonds as collateral as a move “that will further boost liquidity in the economy.”

“We welcome the ECB’s decision to accept Greek government bonds as collateral in the Eurosystem, a move which will further boost liquidity in the economy,” Prime Minister Kyriakos Mitsotakis posted on Twitter.

“Acting decisively and with a concrete economic plan, Greece will come out even stronger through these challenging times,” he added.

In its announcement, the ECB said it will accept government-guaranteed loans as collateral even with lower credit quality, and it will allow banks to pledge more unsecured debt as collateral.

It will also reduce collateral valuation “haircuts” by a fixed factor of 20 percent and will begin accepting Greek government debt as collateral, even if such papers are below investment grade.

The ECB also said it will make it easier for banks to borrow cash at rock-bottom rates during the coronavirus crisis, as it eased collateral requirements even at the cost of taking on greater risk.

The ECB’s decision to increase its risk tolerance and accept junk-rated Greek government bonds as collateral is part of wide-ranging measures to ease lenders’ access to liquidity.

Finance Minister Christos Staikouras hailed the decision as one that will significantly expand the funding sources of Greek banks and consequently strengthen their ability to support the real economy, businesses and households.

In addition, he said that it is expected to have a positive effect on the marketability and valuations of Greek bonds.