ECB Reduces Maximum Greek Bank Aid as Bailout Eases Cash Tension

The European Central Bank reduced the maximum level of emergency aid available to Greek banks in a sign the country’s financial tensions are easing after a rescue package was agreed with creditors.

In a conference call on Tuesday, the ECB’s Governing Council decided to cut the ceiling on Emergency Liquidity Assistance provided by the Bank of Greece to 89.7 billion euros ($98.9 billion) from 90.4 billion euros, according a person familiar with the decision. The move is the first such reduction since lenders were forced to rely on the facility in February.

Under the terms of a third international rescue for the country agreed this month worth as much as 86 billion euros, Greece’s stricken lenders are in line for up to 25 billion euros in recapitalization funds. As the country lurched close to a departure from the euro this year, lenders suffered capital flight and deteriorating collateral quality, pushing them to tap the Bank of Greece for emergency funding.

The Greek central bank asked the ECB to lower the ceiling for ELA, citing improving liquidity conditions, the person said, asking not to be named as such decisions aren’t public. While the aid is technically provided by the Bank of Greece, its use is being reviewed every two weeks by the ECB. An ECB spokesman declined to comment.

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