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European Central Bank suspends eligibility of Greek bonds as collateral

Author: The Sofia Echo staff Date: Tue, Feb 28 2012 1845 Views
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The Governing Council of the European Central Bank (ECB) has decided to temporarily suspend the eligibility of marketable debt instruments issued or fully guaranteed by Greece for use as collateral in Eurosystem monetary policy operations, the ECB said on February 28 2012.

This decision takes into account the rating of Greece as a result of the launch of the private sector involvement offer, the ECB said.

At the same time, the Governing Council decided that the liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central banks, in line with relevant Eurosystem arrangements (emergency liquidity assistance).

Marketable debt instruments issued or fully guaranteed by Greece will become in principle eligible on activation of the collateral enhancement scheme agreed by euro zone leaders on July 21 2011, and confirmed on October 26 2011, together with a number of other measures aimed at assisting Greece in its adjustment programme. This is expected to take place by mid-March 2012, the ECB said.

Separately, rating agency Standard and Poor's has classified Greek debt as in "selective default" following the deal it made with creditors to reduce its debts, the BBC said on February 28.
S&P said that the terms of that deal triggered the latest downgrade. Greek debt already had a "junk" grade rating from the agency, the BBC said.

On February 27, credit rating agency Moody's said that the risk of Greece defaulting on its loans "remains high," even after European leaders approved a new financial rescue for the country, the Voice of America reported.

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