November 6, 2011
Three of Greece’s biggest banks have issued €6.4bn ($8.8bn) of government-guaranteed bonds likely to be used as security to obtain financing from central banks, a move that points to worsening market conditions amid talk of a disorderly Greek default.
Alpha Bank, EFG and Piraeus on Friday issued the floating-rate notes, which analysts say will probably be used as part of a new €30bn liquidity facility created for cash-strapped Greek banks earlier this year. Under the scheme, Greek banks can issue bonds guaranteed by the government, which can then be used as collateral to receive funding from central banks.
Greek lenders have two sources of central bank liquidity support: the European Central Bank, as well as the so-called Emergency Liquidity Assistance, or ELA, provided by Greece’s own central bank.
“Greek banks had not thus far made full use of a facility to issue an additional €30bn of government-guaranteed bonds, almost surely because the ECB was not prepared to accept them as collateral,” JPMorgan analysts wrote. Friday’s “issuance suggests a softening of that stance”, they said, noting it was the first Greek government-guaranteed bank bond issuance since the summer.
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