FXStreet (Edinburgh) – According to the research team at BBH, the upcoming decision of the ECB on its ELA mechanism remains crucial for the Greek banking system.
Key Quotes
“The decision about Greece’s ELA is key. It is not clear when it will be announced. Greece has passed the reforms needed to start negotiations for a third aid package. The ECB could wait for the national parliaments to approve the new negotiations. News that the euro area has agreed in principle to a 7 bln euro bridge loan is another sign that conditions are moving away from the edge of the abyss”.
“In addition to a political hurdle, there are two more technical issues the ECB must consider. First, are Greek banks still solvent, given the deposit withdrawals and deteriorating loan books? The second issue involves the collateral that Greek banks use for the ELA borrowings. Do they have sufficient collateral? Has some of the existing collateral been impaired?”.
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