The European Central Bank has stopped monetary policy operations to some Greek banks, following continuous low-level capital flight fom the country.
On Monday alone, some €700m was withdrawn from banks by Greek depositors, with around another €100m of German bunds being bought by the banks (Update: The BBC reports the €700m figure as the week ending Monday, rather than Monday alone). The Wall Street Journal reports that:
In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, though in January they topped €5 billion.
All this money exiting the Greek banks has left them with serious liquidity issues, which the ECB had been stepping in to correct. As of the end of January, the banks had received €73 billion in liquidity support from the ECB. Now, however, Zerohedge is reporting that:
ECB STOPS MONETARY POLICY OPERATIONS TO SOME GREEK BANKS AS RECAPITALISATION NOT IN PLACE -CENBANK SOURCES
The EFSF is expected to step up in the ECB's stead, and provide €18bn in recapitalisation funds. The banks which have been cut off from the firehose will now have to go to the Greek central bank to access the funds instead.
The news sent the euro down against the pound and dollar:
Update: Reuters reports that:
The ECB only conducts its refinancing operations with solvent banks. With no access to ECB funds, the banks concerned must go to the Bank of Greece for emergency liquidity assistance (ELA).
It was unclear exactly how many banks were affected.
One person familiar with the matter said four Greek banks' capital was so depleted they were operating with negative equity capital. According to its own rules, the ECB cannot provide liquidity to banks in such a situation.