ECB Said to Leave Greek Collateral Haircuts Unchanged For Now

The European Central Bank decided not to tighten Greek banks’ access to emergency cash just yet, people familiar with the matter said.

The Governing Council agreed in a telephone conference on Tuesday to raise the cap on Emergency Liquidity Assistance by

1.1 billion euros ($1.2 billion) to 80 billion euros, the people said, asking not to be named because the call was private. A decision on whether to increase the discount on the collateral posted -- making it harder for banks to get the cash -- could still be made at next week’s council meeting in Frankfurt. An ECB spokesman declined to comment.

As the ECB tries to keep Greek lenders afloat, it also needs to protect itself and the Greek central bank against any debt default. That’s becoming tougher as the Mediterranean nation stalls on reform promises that would unlock aid payments.

While some officials have pushed for collateral haircuts, the ECB was waiting to see if euro-area finance ministers made any advances in bailout negotiations in Brussels on Monday. Those talks ended with a statement from ministers that welcomed progress so far, yet said more time and effort is still needed before payments can be released.

Greek ELA is offered to solvent lenders to replace outflows of customer deposits. While the cash is provided by the Greek central bank at its own risk, the ECB’s Governing Council has the power to restrict the funding.

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