ECB doesn’t cut off Greek banks, for today

By Laurens Cerrulus

The Frankfurt-based bank signals reluctance to keep financial lifeline open to the cash-starved country.

The European Central Bank will continue to provide emergency loans to Greece banks at the current level, the institution announced in a statement Sunday, but signalled the support wouldn’t be increased and may be cut any day.
The bank’s governing board held an emergency conference call after Greece’s talks with its international creditors collapsed over the weekend, raising the specter of a default and possible exit from the euro. Across Greece thousands of Greeks lined up at ATM machines to withdraw hundreds of millions of euros from their bank accounts.

The ECB, as expected, didn’t cut off Greece’s access to its emergency loan program, which has become a €90 billion lifeline for the country’s financial sector this year. But the bank has taken a step in that direction by not allowing Greek banks to expand their access to financing, despite their pressing need for cash as money flies out of personal accounts.
Bank officials have indicated that the ECB will likely stop support in the absence of an agreement between Greece and its creditors. The current bailout expires on Tuesday.
“The Governing Council declared it will work closely with the Bank of Greece to maintain financial stability,” the statement read. “Given the current circumstances, the Governing Council decided to maintain the ceiling to the provision of emergency liquidity assistance to Greek banks at the level decided on Friday.”
The ECB added that its “Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary policy stance” and the council “is determined to use all the instruments available within its mandate.”
The doubts about ECB support and the pressure on financial institutions has raised expectations of capital controls coming into force as soon as Monday and an extended bank holiday.