In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.
As we laid out earlier,according to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: "the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms."
21 April 2015, by Tyler Durden (Zero Hedge)http://www.zerohedge.com/news/2015-04-21/ecb-prepares-sacrifice-greek-banks-50-collateral-haircut
As sometimes occurs with Tyler Durden, it is difficult to understand just what he is trying to say. Will individual banks be permitted to raise the value of their collateral with the Central Bank of Greece to 75 or 90 percent in the event of a default?
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