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The ECB released its weekly statement for the week ending at 21 December 2012. Since on 21/12/2012 Greek government titles began to be accepted as collateral in ECB refinancing operations this week’s statement should provide for a closer look at the magnitude of the change in Greek banks borrowings.

Asset Side

Looking into the asset side ‘Other claims’ were lower by €20.7bn which should correspond to the reduction of the use of ELA by the Greek banking system. Since MROs happen in the middle of the week, Greek banks would only have access to the marginal lending facility which shows an increase of €13.61bn. The almost €7bn difference should most probably be attributed to the (cash) part of the December Greek disbursement which would be used for budget needs (the rest of the funds were in the form of EFSF notes and bills). Regular operations (MRO and LTRO) were lower by €4.9bn which should be attributed to the generally positive climate since the OMT announcement.

Liability Side

On the liability side banknotes in circulation show a very large increase of €11.91bn, probably of seasonal (Christmas) nature. Bank reserves are 11.62bn lower and liabilities to other euro area residents by €18.27bn, both in the case of ‘General Government’ and ‘Other liabilities’. Liabilities to non-euro area residents are €3.57bn higher which is a negative development.


The latest MRO (which should include any borrowing by Greek banks from the marginal lending facility being moved to the regular lower rated weekly operation) shows an increase of €17bn from €72.8bn to €89.66bn. In general, it seems that Greek banks managed to move a large part of their ELA borrowing to the ECB regular operations while also lowering their Target2 liabilities (with the help of the disbersement). Things will be much clearer when BoG releases its December balance sheet.

On a related note, the ECB also included the Greek collateral haircut list in its decision of 19 December. The haircuts are quite heavy (15% for T-Bills of up to 1 year maturities) but will still allow for much lower yields in the forthcoming T-Bill auctions which could move close to 1% (from over 4%). Such a development would make current T-Bills a high return investment. Remaining Greek bonds will face haircuts of 56-57% which should place a rather high floor on their yields.

Greek collateral haircuts

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Kostas Kalevras

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