Greek cenbank provided emergency funding to banks
Sat Sep 3, 2011 12:42pm EDT
* Greece's cenbank provided emergency funding in August-central bank governor
* Central bank ready to provide further liquidity if needed-governor
* He urges faster structural reforms (Add more cenbanker quotes, details)
ATHENS, Sept 3 (Reuters) -
Greece's central bank provided emergency liquidity to some Greek lenders in August and it is ready to provide further funding if needed, its governor George Provopoulos said on Saturday.
Emergency liquidity assistance (ELA) is effectively loans by the national central bank to illiquid but solvent banks.
Greek banks have become dependent on the ECB for liquidity after being shut out of wholesale funding
markets due Greece's sovereign debt crisis.
Some are now strapped for eligible collateral after a series of sovereign credit downgrades, with Piraeus Bank (BOPr.AT) the second Greek lender to admit the need for emergency funding.
"Since the beginning of the fiscal crisis, as part of the Eurosystem, Bank of Greece is providing significant support to the liquidity of the banking system," Provopoulos said in an interview with Sunday's Kathimerini newspaper.
"Bank of Greece also provided emergency funding in August," he said, adding the central bank was ready to provide more funding if needed.
On top of Greece's debt woes, domestic banks were also hit by significant write downs in their Greek government bonds portfolios in the first half for their participation in a voluntary debt exchange programme (PSI) aimed at relieving Greece's debt burden.
Provopoulos said that after this and a test of their loan books by BlackRock Solutions, commissioned by the central bank and expected to be completed later this year, some Greek lenders will have to strengthen their capital.
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Some banks will have to boost their capital adequacy...in order to secure international confidence and access to world markets," Provopoulos said. "It is the only way for them to play the role that is required to finance the recovery of the Greek economy."
Sovereign debt downgrades, deposit outflows and rising loan losses in a deepening recession have forced Greek banks to explore tie-ups to bolster their financial strength in a bid to regain access to wholesale funding markets.
On Monday, Greece's second- and third-largest lenders Eurobank (EFGr.AT) and Alpha Bank (ACBr.AT) agreed to merge to form the largest bank in southeast Europe, sparking expectations of further
deals in Greek banking.
Provopoulos said the move was a very positive step towards Greek banking sector consolidation and said more mergers would follow.
He also called on the Greek government to speed up structural reforms to kickstart the economy.
"Recession would have been milder, if reforms had moved faster, if fiscal deficits had been cut more drastically and if competitiveness had been improved significantly," he said. "Efforts should focus on these crucial areas now."