Emergency aid fund is set up for Greek banks

GREECE’S central bank has activated an emergency liquidity assistance scheme so that it is available if banks need to draw from it, although no banks are believed to have requested funds yet.

The Emergency Liquidity Assistance (ELA) is one of the options the Eurozone has at its disposal to keep Greek banks afloat if the country’s sovereign debt is pushed into default by a new bailout deal that was put together by EU leaders last month, and the ECB stops accepting it as collateral.

Greek yields have edged up throughout this week, hitting fresh highs yesterday. Yields on two-year bonds topped 46 per cent, although traders said flows were extremely thin and markets remain largely illiquid and inactive.

The risk premium on Greek government bonds relative to benchmark German debt hit a euro-era high of 1,650 basis points, having erased all signs of relief seen after the bailout deal was announced in July.

As the peripheral Eurozone country’s woes continue, the International Monetary Fund (IMF) said yesterday that another tranche of aid may be delivered to Greece by the end of next month.