ECB’s Knot Says ‘Business as Usual’ on ELA Until Greece Defaults

The European Central Bank won’t shut Greek banks off from emergency liquidity as long the country doesn’t default on its debt and maintains a dialog with creditors, Governing Council member Klaas Knot said on Tuesday.

“Until the moment there is a default, it’s business as usual,” Knot told Dutch lawmakers in The Hague. “Greek banks are solvent at the moment and are even able to cope with some headwinds in case of a default of the Greek government.”

With Greece shut out of international markets, the country’s banks are reliant on Emergency Liquidity Assistance from the Bank of Greece to stay afloat. The cap for the lifeline is reviewed weekly by the Governing Council, which has to make sure it complies with a European Union ban on monetary financing. In past weeks, the ECB has also discussed raising the discounts applied to the securities pledged in return for ELA.

“As long as there is no default and as long there is a perspective of an agreement between creditors and Greece which could prevent a default, the collateral we accept will be valued according to normal rules by which we value ELA collateral,” Knot said.

With looming debt payments that could send the country into default, a deal between Greece and its creditors to unlock bailout money is still not in sight. Prime Minister Alexis Tsipras on Tuesday accused the ECB of using tactics that were akin to “financial asphyxiation.”

The ECB is due to discuss the provision of ELA funding at a scheduled meeting on Wednesday.