ECB postpones Greek debt as collateral after S&P credit downgrade

European Central Bank

FILE - In this Jan. 24, 2012 file photo a swan passes by the skyline including the European Central Bank, seen centre, on the river Main in Frankfurt

The European Central Bank stated that Greek debt will temporarily be ineligible as collateral for loans after Standard & Poor’s yesterday cut Greece’s credit rating to “selective default.”

The ECB “has decided to temporarily suspend the eligibility of marketable debt instruments issued or fully guaranteed by the Hellenic Republic for use as collateral in Eurosystem monetary policy operations,” the Frankfurt-based ECB said in a statement today. “This decision takes into account the rating of the Hellenic Republic as a result of the launch of the private sector involvement offer.”

Simultaneously, the ECB decided that the liquidity needs of affected Eurosystem counterparties can be satisfied by the relevant national central banks via so-called “emergency liquidity assistance.”

“Marketable debt instruments issued or fully guaranteed by the Hellenic Republic will become in principle eligible upon activation of the collateral enhancement scheme agreed by the Heads of State or Government of the euro area on 21 July 2011, and confirmed on 26 October 2011, together with a number of other measures aimed at assisting Greece in its adjustment program,” the ECB said. “This is expected to take place by mid-March 2012.”