In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.
As we laid out earlier,according to Bloomberg, the ECB staff proposal lays out three options to reduce central-bank risk: "the scenarios envisage returning haircuts to the level before late last year, when the ECB eased its collateral requirements for Greece; to set them at 75 percent; or to set them at 90 percent. The latter two options could be applied if Greece is in an “orderly default” under a formal ECB program or a “disorderly default,” CNBC said, without further elaborating on those terms."21 April 2015, by Tyler Durden (Zero Hedge)