ECB cuts Greek emergency funding allowance

The ECB has reduced the amount of emergency funding available to Greek lenders, a person familiar with the matter said, as capital controls and an agreement between the country’s government and its creditors eased deposit outflows.

The cap on emergency liquidity assistance was cut by €600m to €89.1bn, and the ceiling will stay in place until the next Governing Council meeting scheduled for September 16, the person said, asking not to be named as emergency liquidity assistance decisions are not public.

The decline in the assistance, which follows a cut of €700m last month, reflects an easing of Greece’s financial crisis following months of dispute that almost drove the country out of the eurozone.

Former prime minister Alexis Tsipras had to impose capital controls after breaking up negotiations with creditors and calling a referendum on the terms demanded, before finally agreeing to a deal.

Deposit outflows in August decelerated to about €300m, the person said.

They fell by about €1.4bn in July, according to the latest available data from the country’s central bank.

Greeks withdrew more than €43bn from their bank accounts over the previous months, or 26.5% of total savings, amid speculation that deposits will be wiped out or re-denominated into drachmas.

The bleeding, which had made Greek lenders reliant on weekly injections of emergency liquidity assistance, almost stopped in August, as transfers of money abroad are restricted under the capital controls in place, while a limit of €420 per week has been set on withdrawals from ATMs.

Eurozone governments have said depositors will not be asked to plug any capital shortfall in lenders, after Tsipras struck an agreement for a new bailout.

A bail-in of depositors “would be counterproductive.

Similar considerations were not deemed to be applicable to senior bondholders,” Draghi said after the Governing Council meeting in Frankfurt.

The ECB is carrying out a comprehensive assessment of Greek lenders’ balance sheets, the results of which are foreseen by the end of October.

A recapitalisation backed by €25bn of emergency loans from the eurozone will follow by the end of the year under the agreed aid programme.