Greek cbank activates funding scheme for banks-paper

ATHENS, Aug 25 (Reuters) - Greece’s central bank has activated an emergency liquidity assistance scheme so that it is available if banks need to draw from it, financial daily Imerisia wrote on Thursday without citing any source.

The Emergency Liquidity Assistance (ELA) is one of the options the euro zone 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.

“The ELA has already been activated through the Bank of Greece. All small, medium and large banks (except for National Bank of Greece) have stated they will participate, in order to be able to draw funds if and when they need them,” Imerisia wrote without mentionning its source.

The Greek central bank declined to comment on the report.

Rising bad loans, sovereign debt downgrades, deposit outflows and a deepening recession have taken their toll on Greek banks, which also stand to suffer write-downs from a bond swap deal that is part of the country’s second rescue package.

ECB emergency funding to Greek banks stood at 103 billion euros at the end of June, showing that the banks have been cut off from borrowing from other European lenders on the interbank market.

The ELA is effectively emergency loans given by euro zone national central banks to strapped commercial banks. The ECB defines it as support given by central banks in “exceptional circumstances and on a case-by-case basis to temporarily illiquid institutions and markets”.

The loans are given at the discretion of the national central bank although they have to be rubber stamped by the ECB.

Finance Minister Evangelos Venizelos said on Wednesday that a separate, 10-billion-euro Financial Stability Fund set up to recapitalize Greek lenders in case of need can inject capital by buying common shares issued by the banks.

Reporting by Ingrid Melander and Lefteris Papadimas; editing by Patrick Graham