February 12, 2015 / 12:26 PM / 5 years ago

Exclusive: ECB policymakers hold teleconference on financing Greek banks - sources

FRANKFURT (Reuters) - European Central Bank policymakers held a telephone conference on Thursday on providing finance to Greek banks, two people familiar with the matter told Reuters, before a crunch meeting of finance ministers about the country’s future.

The discussion among the policymakers comes as concern grows about the financing of Greek banks after the country all but tore up a reform-for-aid programme.

Talks among euro zone finance ministers on Wednesday failed to produce an agreement on extending Greece’s bailout programme, which expires at the end of this month. Further talks will be held Monday. An agreement would win extra time to negotiate a new reform programme or ‘contract’ with Greece.

For now, Greek banks are reliant on Emergency Liquidity Assistance by the country’s central bank. How long that can last is unclear.

“The question now is if there is political movement and whether Greece comes under a programme,” said one person familiar with the matter. “ELA is for solvent banks and their solvency is closely linked to the solvency of the state.”

The ECB has authorised Greece’s national central bank to provide the country’s lenders with some 60 billion euros ($68 billion) in ELA, people familiar with the matter have said. But the assistance requires regular approval from the ECB’s Governing Council.

The ECB would be loath to cancel the assistance, which could trigger the financial collapse of Greece. But it is also careful to respect the rules governing ELA: that it be for a short period of time and given only to solvent banks.

ELA provision is critical for Greece’s banks, and in turn for the country, after the ECB cancelled its acceptance of Greek bonds in return for funding last week.

The ECB’s Governing Council next gathers on Feb. 18 but its 25 members are free to hold teleconferences at any time.

The ECB declined to comment, when asked about the telephone conference.

Reporting By John O'Donnell; Editing by Paul Carrel, Larry King

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