ECB lifts waiver on Greek bonds as collateral

FXStreet (Bali) - The ECB has decided that it will lift the current waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by Greece, not accepting the debt-stricken government bonds as collateral starting on Feb 11th, noting that it cannot assume a successful conclusion of Greece review, adding that bank liquidity needs can be met by Greek central bank.

The first reaction in the Euro was to pop higher, but after second thoughts, the market's judgement is that the headlines are EUR negative, as one would expect, as the decision implies that Greek instruments cannot be used for the ECB QE program. Martin Baccardax, Deputy Managing Editor at Europe MNI, notes: "ECB decision steers weaker Greek banks to ELA, where they're easier to monitor, while stronger banks with EFSF bonds can still access ECB window."

Press release

Eligibility of Greek bonds used as collateral in Eurosystem monetary policy operations

ECB’s Governing Council lifts current waiver of minimum credit rating requirements for marketable instruments issued or guaranteed by the Hellenic Republic

Suspension is in line with existing Eurosystem rules, since it is currently not possible to assume a successful conclusion of the programme review

Suspension has no impact on counterparty status of Greek financial institutions

Liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central bank, in line with Eurosystem rules

The Governing Council of the European Central Bank (ECB) today decided to lift the waiver affecting marketable debt instruments issued or fully guaranteed by the Hellenic Republic. The waiver allowed these instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfil minimum credit rating requirements. The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the programme review and is in line with existing Eurosystem rules.

This decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations. Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing Eurosystem rules.

The instruments in question will cease to be eligible as collateral as of the maturity of the current main refinancing operation (11 February 2015).