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ECB Says Greek Bonds No Longer Eligible As Collateral, Leaves Greece With Under €65bn Of ELA Borrowing Capacity

Tyler Durden's picture


From the ECB:

Collateral eligibility of bonds issued or guaranteed by the Greek government


Due to the expiration on 25 July 2012 of the buy-back scheme for marketable debt instruments issued or fully guaranteed by the Hellenic Republic, these instruments will become for the time being ineligible for use as collateral in Eurosystem monetary policy operations.


In line with established procedures, the Governing Council of the European Central Bank (ECB) will assess their potential eligibility following the conclusion of the currently ongoing review, by the European Commission in liaison with the ECB and the IMF, of the progress made by Greece under the second adjustment programme.


Liquidity needs may be addressed by the relevant national central bank in line with existing Eurosystem arrangements.

Remember when the ELA was a "temporary, stop-gap" measure? Neither do we. So while Greek bonds are no longer cash good collateral (who would have thunk it: a broke country's bonds are not good collateral), Greece is still eligible for ELA. There is however a catch. Back in May we quantified the ELA dry powder still remaining for Greece, and the fact that at this point there is virtually no additional capacity left. The ECB is aware of this. With this move, is the ECB beginning to set the stage for the Greek exit?

From Quantifying The Plan Z Dry Powder - This Is The Greek ELA Borrowing Capacity

We already posted a full run down from JPM on what the immediate costs from a Greek EMU exit would be (starting at €400 billion and going higher), but one point that bears repeating is just how much borrowing capacity Greece has under the ELA in the aftermath of today's news that the ECB is leaving Greek banks to fend for themselves until such time as the Greek recapitalization payment is wired over to Greece, which the ECB has defined simply as "soon." The answer: woefully inadequate, and certainly not enough to backstop the remaining Greek deposits of €170 billion as of the end of March (likely far less now), at €65 billion. And that's an upside estimate: as JPM says "The true maximum amount that Greek banks can borrow via ELA is likely though to be significantly smaller because not all loans are accepted as collateral via ELA." Remember: this is all just one giant game of chicken - Greece's Syriza has bet the farm that the cost from a Greek fallout is just too big to Europe and the terms of the hated "Memorandum" will be adjusted, while to Europe, on the other hand, the outcome to Greece, at least according to Europe and the IIF's Dallara will be "between catastrophic and armageddon." So... Who blinks first?

From JPM:

Greek banks have run out of ECB eligible collateral already and can only access Bank of Greece’s ELA, but even with ELA, the collateral,typically loans, is not unlimited. They have already borrowed €60bn via ELA which, assuming 50% haircut corresponds to around €120bn of loan collateral. Outstanding loans are €250bn, so Greek banks have a maximum of €130bn of remaining loan collateral which allows for a maximum of €65bn of additional borrowing from Bank of Greece’s ELA. This corresponds to around 40% of Greek bank deposits which stood at €170bn as of the end of March. The true maximum amount that Greek banks can borrow via ELA is likely though to be significantly smaller because not all loans are accepted as collateral via ELA. The alternative is for Greek banks to be allowed to issue more government guaranteed paper but the ECB can, with a 2/3rd majority, block a steep and unsustainable increase in Bank of Greece’s ELA. This would effectively cut Bank of Greece off from TARGET2.

Once TARGET2 starts unwinding, with a massive €644 billion claim on the Eurosystem by the Bundesbank, and the realization that an imploding heretofore "contingent" and suddenly all too real liability amounting to 25% of German GDP means an in-kind collapse in living standards, then the simmering German anger will go truly parabolic.

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Fri, 07/20/2012 - 09:18 | 2635575 GetZeeGold
GetZeeGold's picture



My papers.....are no good?


Fri, 07/20/2012 - 09:21 | 2635593 strongband
strongband's picture

Ja! Diese papieren ist scheise!

Fri, 07/20/2012 - 09:25 | 2635627 BaBaBouy
BaBaBouy's picture

1 Ponzi Scheme Down, 9,999 left to go ...

Fri, 07/20/2012 - 09:51 | 2635781 Harlequin001
Harlequin001's picture

I guess this toilet paper doesn't have the correct printing on it...

Maybe they should use a different colour, like red...

Fri, 07/20/2012 - 09:59 | 2635824 Skateboarder
Skateboarder's picture

Well, at least they're not the USG. Stateside, 65 bil is like... a week of spending?

Fri, 07/20/2012 - 09:35 | 2635692 agent default
agent default's picture

Diese papieren sind scheise !<- Note  verb.

By Order

SS GrammarGruppenFuehrer

Fri, 07/20/2012 - 10:00 | 2635828 Nussi34
Nussi34's picture

Kein Volk, ein Reich, ein Euro!

Fri, 07/20/2012 - 09:18 | 2635580 bank guy in Brussels
bank guy in Brussels's picture

Sounds like a recipe for Jim Sinclair's 'QE to infinity'

Fri, 07/20/2012 - 09:19 | 2635583 magpie
magpie's picture

The Titanic's lifeboats have been rehypothecated.

Fri, 07/20/2012 - 09:20 | 2635586 strongband
strongband's picture


Fri, 07/20/2012 - 09:21 | 2635595 kito
kito's picture

seems there is a lull in "european debt gone bad" news....markets, investors, people in general are fatigued by the issue.......complacency is setting in.....beware.............

Fri, 07/20/2012 - 10:01 | 2635841 ATM
ATM's picture

Exactly. The dulling of the senses has gone about a far as it can go. Nobody gives a shit anymore because they heard it all before and everything keeps going like it has in the past. So why worry?


Fri, 07/20/2012 - 09:23 | 2635617 dwayne elizando
dwayne elizando's picture

That's got to be bullish!

Fri, 07/20/2012 - 09:29 | 2635656 Don Diego
Don Diego's picture

The Germans are lucky to have just 644 billion in Target 2, the Luxembourguish have 120 billion for just 520.000 people in the whole country.

Fri, 07/20/2012 - 11:16 | 2636215 Zeroexperience2010
Zeroexperience2010's picture

Actually the Buba has  EUR 728.566.720.220,27  (As at: 30 June 2012) on its TARGET2 sheet:


The luxemburger shouldn't cry too loud, they are net RECEIVERS of EU money, see for ex:


but I agree, 120 billion for 520k people is a lot...quite a f..ing lot

Fri, 07/20/2012 - 09:31 | 2635670 localpacific
localpacific's picture

Binary Options Daily Analysis: as a hedge to greece perhaps 

Fri, 07/20/2012 - 09:34 | 2635685 ruffian
ruffian's picture

Just push the RED BUTTON already........or should I say gold button

Fri, 07/20/2012 - 09:35 | 2635693 Itch
Itch's picture

Turn off the lights on the way out...

Fri, 07/20/2012 - 09:38 | 2635709 Need More Cowbell
Need More Cowbell's picture

ZH reported in June that Germany's Target2 claims were already near $700B!  Why are they only $644B now?  Are they going down?!?!?!?   http://www.zerohedge.com/news/europes-parabolic-est-target2-hits-%E2%82%AC700-billion

Fri, 07/20/2012 - 10:39 | 2636038 viahj
viahj's picture


Fri, 07/20/2012 - 11:18 | 2636223 Zeroexperience2010
Zeroexperience2010's picture

Actually the Buba has EUR 728.566.720.220,27 (As at: 30 June 2012) on its TARGET2 sheet from the official Buba site.

Fri, 07/20/2012 - 09:43 | 2635747 monopoly
monopoly's picture

If the German people wake up to all the deceit going on in Europe, it will not be a pretty picture. Do not piss off the Germans.

Fri, 07/20/2012 - 10:01 | 2635843 Peter Pan
Peter Pan's picture

The German people have already been sucked in by higher powers. The real reason is not to save Greece et al, but to fulfil a globalisation agenda for which the German people will have to bear a significant cost.

Fri, 07/20/2012 - 10:02 | 2635846 Nussi34
Nussi34's picture

We will piss in the Mediterranean and cause a Tsunami that will destroy Greece  & the rest of the PIIGS!

Fri, 07/20/2012 - 10:03 | 2635862 Peter Pan
Peter Pan's picture

He who pisses in the ocean will get it back in his salt.

Fri, 07/20/2012 - 13:18 | 2636779 miltiadis
miltiadis's picture

to mouni tis manas sou

Fri, 07/20/2012 - 09:44 | 2635753 Satan
Satan's picture

The last few billion will disappear into the pockets of a few...Is there really any other reason for a Greek politician to still be hanging around other than to fill his boots with the remainder of what little is left?

Fri, 07/20/2012 - 09:47 | 2635771 Nothing To See Here
Nothing To See Here's picture

Of course, it begs the question : how could they ever have been considered collateral in the first place?

Fri, 07/20/2012 - 10:06 | 2635879 ATM
ATM's picture

It's collateral because they say it is collateral, sort of like the Fed saying that all 1.6T of worthless Treasury debt they own are good as gold. Or the 860billion of mortgage backed securities they own are AAA when in fact they are worthless.  

What the Fed has is all the worthless bullshit that they claim is worth 100 cents on the dollar and that is the underpinning of the US financial system.

Fri, 07/20/2012 - 09:52 | 2635799 q99x2
q99x2's picture

Will the banksters accept their first born?

Fri, 07/20/2012 - 09:58 | 2635814 Peter Pan
Peter Pan's picture

Watch Greek politicians do their best to try and stay within the Euro. The parliamentary record shows them as having substantial deposits which will obviously be converted to lowly drachmas if Greece was to depart. The previous prime minister alone had close to 3 million euro.

Fri, 07/20/2012 - 10:03 | 2635858 Nussi34
Nussi34's picture

3 millkion Drachme still buy a lot of donkeys as a means of transportation.

Fri, 07/20/2012 - 10:08 | 2635880 Peter Pan
Peter Pan's picture

Unfortunately the real donkeys are those who lent money to Greece in the first place without receiving real collateral or conducting proper diligence.

Fri, 07/20/2012 - 10:08 | 2635885 vote_libertaria...
vote_libertarian_party's picture

What???  Greece was fixed 17 times already, the nice men on TV told me to buy buy buy.

Fri, 07/20/2012 - 10:27 | 2635984 overmedicatedun...
overmedicatedundersexed's picture

the world economic story: jet black iron ball flying thru the dark night. tip of the hat to basho et al

Fri, 07/20/2012 - 10:30 | 2635995 Yen Cross
Yen Cross's picture

Well used Islands for sale. Inquire @ Robb Report.com /sarc

Fri, 07/20/2012 - 11:13 | 2636203 blueridgeviews
blueridgeviews's picture

Call me ignorant, but really, NOW they say Greek Bonds can't be used for collateral? Where have they been the last two years? LALA Land?

Fri, 07/20/2012 - 11:20 | 2636234 Nobody For President
Nobody For President's picture

Troika visits, ECB starts tolling bell for Greece. This really (finally) sounds like the roll over -  easing Greece out or showing them the door.

Fri, 07/20/2012 - 12:22 | 2636521 All is chosen
All is chosen's picture

Can't someone help them out with a back-dated infinite rehypothecation joker? - Or is that a restricted membership thing?

Fri, 07/20/2012 - 13:56 | 2636959 covert
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