ECB can stop Greek banks from paying creditors

European Central Bank supervisory chief Daniele Nouy said on Friday the ECB had the power to suspend a Greek bank’s payments to its creditors if that institution was deemed about to be resolved or liquidated.

Nouy made her comments in a letter responding to a query by a member of the European Parliament.

Under an international bailout agreed last summer, Greece is set to receive up to 25 billion euros of public money to recapitalize its banks, many of which are partly state-owned and have been left with few private stakeholders to “bail in” by converting their claims to equity.

Asked whether the ECB can introduce a moratorium to stop “bail-inable capital” from leaving Greek banks, Nouy said Greek rules gave the ECB the power to do so, provided that a bank it supervised was about to fail.

“The aim of such a measure is generally to temporarily suspend payments to creditors by the bank in question, in anticipation of the start of liquidation or resolution proceedings,” Nouy, chair of the ECB’s bank supervisory board, said in her response to a member of the European Parliament.

The ECB has directly supervised Greece’s four largest banks – National, Piraeus, Eurobank and Alpha – since taking over oversight of the eurozone’s top lenders roughly a year ago.

“As a consequence of the continuous monitoring, the ECB has taken actions aimed at restricting or preventing operations which would have led to a further deterioration in the liquidity position of those banks,” Nouy said in the letter.

[Reuters]