ECB considering to ban Greek banks from buying their own sovereign's debt
Greek lenders could be banned from adding government debt to their holdings if the European Central Bank is to have its way.
Reports on Thursday surfaced over the ECB’s consideration of legally banning Greek banks from loading up on their sovereign’s short-term debt, in a bid to protect the region’s financial system.
The ECB’s latest oversight body, the Single Supervisory Mechanism, is looking to cap Greek banks’ holdings of domestic treasury bills, according to officials. That however, means such a measure would cut off a key source of funding for Athens and worsen discord with its creditors.
The ECB in mid-February issued a recommendation to the four Greek lenders under its supervision to refrain from buying more of the debt but concerns are mounting amongst policymakers these calls may have fallen on deaf ears and Greek lenders could go ahead and stock debt regardless.
The latest reports come ahead of Thursday evening’s EU summit in Brussels in which Greek government officials will meet with the EU policymakers including ECB chief Mario Draghi together with leaders from Germany and France.
Its likely talks between Greek leaders and the ECB will revolve around the central bank the ECB refusing to lift its cap on the amount of T-bills it will accept as collateral in exchange for central bank loans, with that cap now at €3.5bn.
Greece is hoping to push for a political deal that would allow the country access to €7.2bn in bailout funds that its international creditors have refrained from providing as they push Greece to adopt austerity measures and adhere to conditions.