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Crucial ECB collateral waiver for Greek banks hinges on bailout deal

Greekbanks are hopeful the ECB will open its liquidity taps if a preliminaryagreement is reached between the government and its international creditors onApril 22.

TheECB has not ruled out a decision by the end of the month, but it also may be someway off, as, according to a spokesman, its governing council might wish to seethe deal passed into law first.

Inorder for Alpha BankAE, Eurobank ErgasiasSA, National Bank ofGreece SA and PiraeusBank SA to regain access to cheap funding facilities from the ECB,the central bank's governing council must approve a waiver allowing them topost Greek bonds as collateral for cash loans. Currently the four banks, deemedsystemically important, do not qualify for the programs because of Greece's lowsovereign credit ratings, and must rely on more-expensive emergency liquidityassistance from the Greek central bank.

Inlate 2015, the ECB said the waiver was back on the agenda. It had canceled itin February of that year because of doubts over Greece's long-term financialprospects, as the new left-wing Syriza government staged a controversialrebellion against the country's bailout terms.

Onthe sidelines of a Budapest industry conference on April 12, Eurobank's deputygeneral manager and chief market economist, Platon Monokroussos, told S&PGlobal Market Intelligence that a new waiver should be passed before the end ofthe month, so long as the government and the coalition of creditors agree onthe reform package without major delays.

"Quantitativeeasing and debt relief [for Greece] are expected at some point in thesummer," he added.

AnthonyKouleimanis, a group strategy executive at National Bank of Greece, said in aninterview that, if the ECB is happy with the deal this time around, "itwould not be crazy to think the road will be open to a reinstatement of thewaiver; we are optimistic this could happen."

Forits part, Alpha Bank is taking a conservative approach to its predictions. Aspokeswoman from the bank's investor relations department in Athens said in atelephone conversation that the reinstatement of the waiver before the end of Aprilseems a remote possibility, given the many questions surrounding thenegotiations.

And,historically, the negotiations could have been smoother. The Greek governmenthas been accused of being slow to implement reforms, and was lately of leaking to theWikileaks website the transcript of a conversation between IMF representativesthat highlighted division inside the creditor group over which strategy wouldbe best for Greece. Meanwhile the talks were paused on April 11 and are set toresume April 18, just four days before the crucial April 22 meetings of the ECBand the Eurozone finance ministers.

ECB representative Nicos Keranis said in an interview thathe was not sure the central bank would be ready to have the waiver by April 22.

"Ourgoverning council is meeting on April 22, and it may discuss the issue but itmay not," he said, adding that the ECB "might want to wait until theagreement is properly legislated." However, he also refused to rule outthe possibility that the waiver could be granted by the end of April.

Hemade reference to a Dec. 3, 2015, speech by Vítor Constâncio, when the ECB vicepresident said: "[Regarding] the waiver, the main condition is thatthe governing council … be satisfied that the country under a program iscomplying with the program, and that could even happen before the conclusion ofthe review, if we [were] close enough to that end of the review and [were]convinced that the review would [be] successful."

PiraeusBank could not be reached for comment.