BoG recently released its November 2012 financial statement.


Regular refinancing operations were even lower in November, registering at €5.6bn (compared to €6.52bn during October). The fall is mainly attributed to lower MRO lending towards credit institutions. A large part of the fall reflected an increase in ELA which increased €0.5bn to a total of €123.3bn (more than 60% the projected 2012 GDP). Nevertheless, posted collateral (not including collateral covering regular operations) fell from €246.64bn to €245bn which should reflect higher prices in certain bank assets such as the post-PSI bonds.


Bank reserves increased during November from €1.77bn to €2.35bn (current accounts + deposit facility). This should be attributed to lower demand for banknotes which brought the 9.2 figure down to €15.04bn (from €15.49bn). The general government account was lower at €3.36bn (from €4.32bn in October) while Target2 liabilities were roughly unchanged at €108.46bn.

It seems that still only resident developments are having an impact on BoG balance sheet, with banknotes being the primary factor (after a large increase during the summer elections). Greece remains decoupled from the developments in the rest of the periphery where Target2 liabilities have fallen significantly due to a return of foreign capital.

The December bond buyback should have a large impact on the BoG balance sheet since banks will replace ELA financing (collateralized by Greek government bonds) with regular financing (collateralized by EFSF Bills). The ECB should also accept Greek government guaranteed securities in its operations again which should push ELA much lower and allow Greek banks to refinance at lower costs. A €1bn fall in ELA should provide an annual reduction of close to €20mn in financing costs. In the short-term, this reduction will be reflected in the remaining weekly ECB financial statements.

From a trading perspective, it is highly possible that future Greek T-Bill auctions will achieve lower rates.