January 16, 2015 / 8:06 AM / 4 years ago

UPDATE 3-Greece's Eurobank, Alpha apply for emergency funding

(Adds NBG not planning similar move, details on Swiss franc exposures)

By George Georgiopoulos

ATHENS, Jan 16 (Reuters) - Two major Greek lenders have applied to tap the national central bank’s emergency funding a year after ending their reliance on it, bankers said on Friday, as Greeks withdraw cash before a snap election on Jan. 25.

Liquidity has also been squeezed by a lack of foreign buyers at recent government T-bill issues.

Executives at both Eurobank and Alpha said the funding requests were precautionary and related partly to their exposure to Swiss franc mortgages. Both had yet to make use of emergency liquidity assistance (ELA) funds.

“We are not making use of ELA funding currently and do not foresee that we will need to in the immediate future as we have sufficient collateral to tap funds from the European Central Bank,” a Eurobank executive told Reuters, declining to be named.

“Swiss franc loan exposure is part of the reasons but not the main one,” the executive said. The franc soared after the Swiss central bank stopped capping it on Thursday.

Greek banks’ exposure to Swiss-franc denominated loans, mostly mortgages, ranges from 2 to 4 percent of their gross loans. Eurobank has a higher exposure of about 11 percent, or 5.7 billion euros, according to Euroxx Securities.

Eurobank, where Finance Minister Gikas Hardouvelis worked as chief economist before joining the coalition government in June last year, still has available ECB-eligible collateral for funding but acted pre-emptively, the executive said.

National Bank, Greece’s largest lender, has no plans to seek emergency funding at the central bank, a spokesman said. “We have no such need.”

ELA is effectively emergency loans from national central banks to commercial banks. Greek banks relied on it heavily at the peak of the debt crisis in 2012 but had repaid it by early last year.

Eurobank shares tumbled 8 percent and Alpha Bank fell 7 percent on Friday, pushing the Athens bourse’s banking index down 7 percent.

Greek banks have been putting up collateral to tap ECB funds, with their total borrowing rising 2.3 percent to 44.9 billion euros ($52.5 billion) in November. It is expected to top 50 billion euros in December.

ELA funding is more costly than borrowing from the ECB and needs its approval.

“We want to have the ELA credit mechanism available as a precaution,” an Alpha Bank executive told Reuters.

One executive said Greek banks now need more collateral on the unhedged part of franc-denominated mortgage portfolios which they had swapped with counterparties. (1 US dollar = 0.8594 euro) (Editing by Ruth Pitchford)

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