Latest BoG data show that Greek banks’ Eurosystem funding dropped by €11.3bn m-o-m in February, following a €13.5bn decline in January, with a further shift in the mix towards the cheaper ECB funding.

In particular, ECB funding eased by €1.0bn or 1.3% m-o-m to €75.23bn at the end of February from €76.22bn at the end of January and €19.35bn at the end of December. At the same time, BoG liquidity provided to Greek banks through the ELA mechanism slipped by a further €10.3bn or 32.7% m-o-m to €21.16bn in February from €31.43bn in January and €101.85bn in December.

Overall, Greek banks’ Eurosystem (ECB plus ELA) funding retreated for sixth consecutive month by €11.3bn or 10.5% m-o-m to €96.39bn in February from €107.65bn in January and €121.20bn in December, falling below the €100bn mark for the first time since August ’11.

It is noteworthy that Eurosystem funding had peaked to €157.09bn in February ’12, while follows a declining trend over the past six months, with a material acceleration as of December. The recorded cumulative decrease of €35.3bn since August ’12 (of which €32.5bn over the last three months), is most likely attributable to higher interbank lending and lower funding needs (potentially resulting from excess Eurosystem funding in the past), while deposit inflows stood at €8.2bn in the Aug ’12- Jan ’13 period partially compensating that reduction.

What is also important is the further shift in the mix between ECB and ELA funding, with ECB accounting for 78% of Eurosystem funding in February from 71% in January compared to just 16% in December and 4-5% in October and November. The continued change in the funding mix results from ECB statement (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 with a consequent positive impact on NII as of Q1’13.

It is reminded that ECB funding had recorded a sharp drop in July ‘12 (down €49.7bn m-o-m) with a consequent increase in ELA liquidity (up €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 accounted for just 18% of Eurosystem funding in July ’12 from >50% in the previous months.