ECB lifts ceiling on Greek emergency loans

Published: Apr 2, 2015 2:58 a.m. ET

By NEKTARIA STAMOULI

http://www.marketwatch.com/story/ecb-lifts-ceiling-on-greek-emergency-loans-2015-04-02

ATHENS--The European Central Bank on Wednesday increased the amount of money Greek banks can borrow under an emergency lending program, extending a lifeline for the country's banks as its government continues tense negotiations with its creditors over its bailout program.

The ECB raised the amount the Greek central bank can lend its banks to EUR71.8 billion ($77.3 billion) from EUR71.1 billion the previous week, according to a Greek bank official. Under the emergency-liquidity assistance program, or ELA, the Greek central bank lends money to its country's financial institutions. The loans carry a higher interest rate than standard ECB loans, and the credit risk stays with Greece.

The ECB declined to comment.

Greek banks were forced into ELA last month after the ECB suspended an exemption that had allowed banks to use junk-rated Greek government bonds as collateral for regular ECB loans.

Last week, the ECB instructed Greece's largest commercial banks that they can't raise their holdings of Greek government debt. The ban on Greek banks increasing their exposure to the Treasury bills poses a challenge to Greece's government, which faces several major debt repayments in early April.

ECB President Mario Draghi has rejected criticisms that the ECB is playing hardball with Greece, and ECB officials have insisted that they are simply applying their rules.

At around EUR100 billion, ECB lending to Greece accounts for about two-thirds of the country's gross domestic product, Mr. Draghi said on March 5.

Write to Nektaria Stamouli at nektaria.stamouli@wsj.com and Todd Buell at todd.buell@wsj.com