Latest BoG data depict that Greek banks’ ECB funding dropped by €49.7bn m-o-m to €24.0bn in July. At the same time, BoG liquidity provided to Greek banks through the ELA mechanism climbed by €44.4bn m-o-m to €106.3bn. The sharp drop in ECB funding and the consequent increase in ELA liquidity was expected since GGBs are not accepted as collateral by ECB as of July 25. It is reminded that ECB had announced on July 20 that “due to the expiration on July 25 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”.

Overall, Greek banks’ Eurosystem (ECB plus ELA) funding slipped by €5.3bn or 3.9% m-o-m, for the first time since April, to €130.3bn in July. Note that the June figure (€135.6bn) was the second highest after the peak of €157.1bn recorded in February.

Decreasing reliance on Eurosystem funding is most likely attributed to increasing deposit inflows in July, following the extended outflows of €6.7bn in June and €9.2bn in May on heightened sovereign risk due to the political uncertainty ahead of June 17 elections. Reportedly, the negative trend that had prevailed until the first half of June was reversed in the second half (i.e. post elections) and was maintained in July. BoG is due to release July deposit evolution data by the end of August.