The European Central Bank intends to tell Greek banks to reduce their holdings of state debt if talks over the country’s finances break down, three people familiar with the discussions said.
The ECB’s Supervisory Board, in charge of bank oversight across the euro area since November, is concerned that Greek lenders will be saddled with illiquid assets from a government heading for default. The board’s actions are contingent on progress at a meeting of euro-area finance ministers that starts on Friday, the people said, asking not to be named as the matter is private. An ECB spokesman declined to comment.
Ministers are trying to reach a compromise between the Greek government’s request for a six-month loan extension with fewer conditions and its creditors’ demands that it meet the terms of its existing 240 billion-euro ($273 billion) bailout. Daniele Nouy, the ECB’s top supervisor, wrote to the country’s lenders last month urging them not to increase their exposure to the state by buying more short-term bonds, given the uncertainty over Greece’s place in the currency bloc.