Greek central bank may activate assistance for lenders

ATHENS: Greece's central bank stands ready to grant emergency assistance to any lender who might face liquidity shortages over the coming days, a Greek newspaper reported on Wednesday.

Some Greek lenders may seek to activate Emergency Liquidity Assistance (ELA), a tool that euro zone central banks have at their disposal to prop up banks, newspaper Imerisia said without citing sources.

Some Greek banks may face shortages because the government will have to withdraw some of its deposits from commercial banks to redeem a 6.6 billion euro bond that is maturing this month, Imerisia reported.

ELA is one of the options the euro zone has at its disposal to keep Greek banks afloat if Greek sovereign debt is pushed into default by the new bailout deal that was put together by EU leaders last month, and the ECB stops accepting it as collateral.

ELA may not have to be activated, Imerisia reported, if a recent increase in bank deposits, estimated at about 1.5 billion euros since the EU bailout decision on July 21, is strong enough to boost Greek banks' liquidity.

Copyright Reuters, 2011