Today, the Governing Council of the European Central Bank will decide whether the Emergency Liquidity Assistance (ELA) mechanism can be activated for the four Greek systemic banks, as requested by the Bank of Greece last Friday.

BoG Governon Giannis Stournaras will attend the meeting of the European bankers in order to inform them on the developments in the Greek economy and the financial system of the country.

With the request submitted on  January 16, the BoG’s administration asks the ECB to guarantee extra liquidity to all four major Greece-based banks (Alpha Bank, Eurobank, Piraeus Bank and National Bank).

The request is a precautionary measure, so that the four banks — the dominant banking institutions in the country — do not face a liquidity squeeze. The recent participation of the banks in the government’s T-bill auction program, combined with rising political uncertainty ahead of a Jan. 25 snap election have reportedly heightened liquidity concerns for all four systemic banks.

The euro’s depreciation in the wake of a recent decision by Switzerland’s central bank, rekindled speculation over a so-called “Grexit” from the eurozone and increased outflow of deposits from Greek banks have aggravated the problem. According to sources, 1.3 billion euros were withdrawn by depositors on Tuesday, days before an upcoming snap election.

What does borrowing from the ELA mean?

It should be noted that Greek banks are in need of borrowing from the ELA, as there are no guarantees acceptable by the ECB, and that this lending is quite expensive, since the interest rate is 1.55% compared to the minor ECB interest rate of 0.05%.