ECB Opened Secret Credit Line for Greek Banks in Bulgaria
- New Europe Investor
- July 17, 2015
With a significant share of the Bulgarian banking sector Greek owned, it has emerged that the ECB secretly opened up a credit line to keep it afloat in the event of a catastrophe.
During Greek negotiations with its creditors, the Bulgarian central bank would not be pushed on its position in the event of a funding crisis in the banking sector. The head of the central bank was asked about government and EU funding, but would not consider these options publicly.
However, the emergence of a quiet credit line been given to Greek owned banks in Bulgaria comes as little surprise.
Four Greek banks have substantial operations in Bulgaria, them being Piraeus, Unite Bulgarian Bank, Eurobank and Alpha Bank.
According to the Financial Times, “special swap arrangements, or bilateral credit lines” had been put in place to dispel fear of contagion in the event Greece and its creditors failed to come to an arrangement.
They were put in place in the heat of the crisis to prevent central banks making any hasty decisions and to give the understanding that the ECB would be a ‘lender of last resort’.
Romania also had similar credit lines put in place. It is understood the ECB is dealing with non EU members heavily exposed to the situation including Albania, Macedonia and Serbia.
The ECB has yet to comment publicly on the matter.