Latest BoG data show that Greek banks’ Eurosystem funding dropped by €13.5bn m-o-m in January with a material change in the mix towards the cheaper ECB funding. In particular, ECB funding almost quadrupled soaring €56.9bn or 294% m-o-m to €76.22bn at the end of January from €19.35bn at the end of December. At the same time, BoG liquidity provided to Greek banks through the ELA mechanism shrank by €70.4bn or 69% m-o-m to €31.43bn in January from €101.85bn in December.

Overall, Greek banks’ Eurosystem (ECB plus ELA) funding fell for fifth consecutive month by €13.5bn or 11.2% m-o-m to €107.65bn in January from €121.20bn in December and €128.90bn in November, reaching its lowest level since September ’11. It is noteworthy that Eurosystem funding had peaked to €157.09bn in February ’12, while follows a declining trend over the past five months, with a material acceleration in January, recording a cumulative decrease of €24.0bn since August ’12 (of which €7.7 were recorded in December and €13.5bn in January). Note that cumulative deposit inflows over the same period (c€11bn) replaced less than half of the reduced Central Bank funding.

What is also important is the radical change in the mix between ECB and ELA funding, with ECB accounting for 71% of Eurosystem funding in January from just 16% in December and 4-5% in October and November. The change in the funding mix results from ECB decision (December 19, ’12), following Eurogroup’s formal decision on the disbursement of the next tranche to Greece, to suspend the previously imposed non-eligibility of GGBs, a development expected to shift Greek banks’ Eurosystem funding towards the less expensive ECB funding.

It is reminded that ECB funding had recorded a sharp drop in July ‘12 (-€49.7bn m-o-m) with a consequent increase in ELA liquidity (+€44.4bn m-o-m), since GGBs were not accepted as collateral by ECB as of July 25, ‘12. Following that ECB decision, ECB funding had accounted for just 18% of Greek banks’ Eurosystem funding in July ’12 from >50% in the previous months.