ECB restores bond waiver to allow Greek banks to tap credit
The European Central Bank (ECB) has restored a key waiver that will let Greek banks tap cheap emergency central bank credit, one step toward putting the country's financial institutions fully back on their feet.
The decision permits Greek government bonds to be used by banks as collateral to borrow from the ECB - even though those bonds are rated too low under the usual rules.
Greek banks were hard hit by the country's financial and debt crisis which has led to three bailouts since 2010.
They have been relying on more expensive emergency financing from the Greek national central bank to do business.
The ECB restored the waiver after the Greek government got a 7.5 billion euro (£5.7 billion) instalment on its latest bailout, ensuring the government can pay its bills for now.
The waiver takes effect with the next borrowing opportunity on June 29, the ECB said in a statement.
Banks can borrow as much as they want at zero interest but only so long as they have enough collateral in the form of bonds or other financial instruments to cover the amount and insure the ECB against loss in case of default. That is why the bond waiver is important.
Greece got the latest instalment of bailout money after a review by the European Union's executive commission and the ECB found that the government was making progress in getting its finances and economy in shape to meet the conditions of its third, 86 billion euro (£66.2 billion) bailout.
The country's latest crisis dragged down its banks, as depositors pulled their money out. The banks are still being propped up by a 420 euro (£323) per week limit on cash withdrawals.
Greece ran up too much government debt and concealed the size of its problems until late 2009, when it admitted it was broke. The three bailouts by other euro member governments imposed tough austerity conditions in return for financial rescue that have kept the country in the euro but slowed its recovery.