ECB Rejects Use of Greek Debt

The European Central Bank has revoked a waiver that allowed banks to use Greek government debt as collateral for loans.  The ECB, in a statement late Wednesday, said it was no longer able to assume there would be a successful conclusion to the Greek government’s bailout talks with its lenders.

The Dow Jones industrial average, which had been up 100 points just before the ECB announcement, quickly turned negative after the news.  The ECB said the suspension was in line with existing Eurosystem rules, but emphasized that the news has no impact on the counterparty status of Greek financial institutions.

“This news will likely scare depositors and result in further bank runs. This all said, if Greece can come to an agreement with the troika, I’m sure the ECB will reinstate the waiver,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note after the announcement.

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