SHARE THIS ARTICLE Share Tweet Post Email

The European Central Bank made it harder for Greece’s banks to access emergency loans, adding pressure on a country whose financial system remains shuttered as it awaits political talks in Brussels.

“The financial situation of the Hellenic Republic has an impact on Greek banks since the collateral they use in Emergency Liquidity Assistance relies to a significant extent on government-linked assets,” the Frankfurt-based ECB said in a statement on its website. “ELA can only be provided against sufficient collateral.”

While the ECB’s Governing Council agreed in a conference call to leave the cap on ELA unchanged at 88.6 billion euros ($98 billion), the change in collateral terms represents a stricter policy overall. That signals officials view the country’s lenders, which have been shut and under capital controls for more than a week, as a greater default risk since voters in Greece’s referendum on Sunday delivered a decisive no to creditors’ bailout terms.

Greek banks can cope with the new terms and the ECB didn’t impose a hard deadline on the country, a Greek official said on condition of anonymity because the matter is confidential. The ECB will review its decision on Wednesday, the official said.

German Chancellor Angela Merkel met French President Francois Hollande in Paris on Monday evening, with the leaders concurring that the “door remains open” for talks with Greece. Euro-area finance ministers will convene on Tuesday to prepare for a summit of the currency bloc’s leaders the same day.

‘All Instruments’

The ECB has been reluctant to preempt the political process as it treads the line between funding a system close to bankruptcy, and the dramatic consequences of shutting it off.

ELA funds are nominally provided by the Bank of Greece, with the ECB exercising a veto. A total shut-off of the facility would likely cause the country’s banking system to collapse. Greek lenders have been reliant on the system since February, shortly after the government of Prime Minister Alexis Tsipras came to power.

The ECB also signaled that it remains ready to act if the Greek situation causes wider instability.

“The Governing Council is closely monitoring the situation in financial markets and the potential implications for the monetary-policy stance and for the balance of risks to price stability in the euro area,” the ECB said. “The Governing Council is determined to use all the instruments available within its mandate.”

(Updates with Greek official in fourth paragraph.)