BERLIN: The European Central Bank has written to Greek banks urging them not to increase their exposure to Greek sovereign debt to avoid endangering the solidity of their finances, a source told AFP on Wednesday.
The ECB, which took over as European banking supervisor last November, was concerned about the risk "that (Greek banks') balance sheets might be impaired by assets of low quality," said the source familiar with the central bank's thinking on the matter.
In a "communication" this week, the ECB urged banks "not to increase their risks," the source said.
"It is something (the banks) should take seriously," it added.
Earlier, both the Financial Times and the Wall Street Journal reported that the ECB had written to the banks asking them not to increase their risk exposure.
The ECB itself declined to comment on the information.
Greek banks are currently the main source of financing for the Greek government because they are the primary purchasers of short-term treasury notes issued by the state to finance itself.
But Greek bonds are currently rated as "junk" by credit rating agencies.
In February, the ECB stopped accepting Greek bonds as collateral in return for loans in its regular refinancing operations, effectively cutting off a key lifeline to Greek banks.
It had previously accepted the bonds under a special waiver mechanism, but rescinded that waiver until Athens' new anti-austerity government under Prime Minister Alexis Tsipras can reach a new debt deal with its creditors.
Without the waiver, Greek banks now rely solely on Emergency Liquidity Assistance or ELA, which is more expensive than normal central bank refinancing operations.
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