ECB margin call deposits spike after Greek bond exclusion

FRANKFURT, March 7 Wed Mar 7, 2012 7:12am EST

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FRANKFURT, March 7 (Reuters) - Cash deposits to cover the declining value of guarantees posted against European Central Bank loans rose to their highest level ever last week, balance sheet data showed, a development which analysts pegged to the ECB's move to exclude Greek government bonds from collateral use.

Deposits related to margin calls - money that banks place at the ECB after the market value of their collateral value declines - jumped to 17.1 billion euros at the end of last week from 2.9 billion the week before.

"This fits in well with the Greek developments," Commerzbank economist Michael Schubert said, referring to the market value of Greek bonds banks have.

"Usually there is overcollateralisation, they would use more of the available collateral, but now there was a squeeze in some peripheral countries, in Greece and maybe in Cyprus," he added.

Last week, the ECB announced it would no longer allow borrowing against Greek government bonds. The temporary move came after rating agency Standard & Poor's downgraded the country to selective default.

The bonds are expected to become eligible again in the coming weeks after the euro zone's rescue fund EFSF puts 35 billion euros on the line to guarantee collateral use of Greek bonds.

Schubert said that the spike in margin call deposits was likely to go away soon.

"This should disappear very soon as we have this collateral enhancement scheme and as soon as it works, this will disappear again," he said. (Reporting by Sakari Suoninen; Editing by Toby Chopra)

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