Will a Collapse of Greek Banks Kick the Country Out of the Euro Zone?
8 Pages Posted: 28 Apr 2015
Date Written: April 27, 2015
Deposit outflows and a decrease of interbank funding have been compensated by increased borrowing of Greek banks to the Eurosystem. Due to collateral eligibility constraints, most of this funding shifted to ELA. The ECB could raise the haircut rates on the collateral pledged by Greek banks to obtain funding from the Eurosystem. The impact of several scenarios of haircut increases are simulated. Insufficient Eurosystem funding could lead Greece to abandon the euro zone.
Keywords: ECB, ELA, Eurosystem, haircut, bank
JEL Classification: E58, F31, F33, F34, F53, E51, E50
Suggested Citation: Suggested Citation