Greece: Emergency Liquidity Assistance

The Global Financial Crisis of 2007-09 triggered a deep recession in Greece, leading investors to withdraw one third of Greek bank deposits between 2008 and 2011. As banks' nonperforming assets rose and rating agencies downgraded Greek sovereign debt, Greek banks' capital fell below levels required for Eurosystem refinancing operations. In response, the Bank of Greece (BOG) provided Emergency Liquidity Assistance (ELA) to all Greek banks. ELA was a revolving credit line open to solvent institutions at a premium rate, so long as that support did not interfere with the Eurosystem's monetary policy. European Central Bank (ECB) rules required the BOG to bear all credit risk for ELA. The Greek case was the first ELA to be administered to an entire financial system. From August 2011 to February 2019, the BOG provided ELA at a 100-150 basis-point premium over the ECB's refinancing rate. ELA outstanding peaked at EUR 124 billion (USD 162 billion) in May 2012, and again at EUR 90 billion in May 2015. In total, banks paid EUR 4.5 billion in premia above Eurosystem interest rates. ELA ended when Greek banks were once again accepted as counterparties in Eurosystem refinancing operations. A small body of research agrees that ELA significantly improved the liquidity of Greek banks.