ECB extends secret credit lines to Romania and Bulgaria

The European Central Bank (ECB) has extended secret credit lines to Romania and Bulgaria in an effort to convince these countries’ central banks to continue supporting the Greek banks’ local subsidiaries, according to Financial Times. According to a source inside the ECB, the institution feared that if anyone decided to withdraw their support for Greek banks’ subsidiaries, the rest would follow. ECB’s bilateral credit lines with Romania and Bulgaria ensure that the Greek banks’ subsidiaries will benefit from financing during the crisis. Similar credit lines have been used during the financial crisis. According to FT, Greek banks have significant assets in Central and Eastern Europe, especially in Bulgaria, where they control over one fifth of the banking system, and in Romania, where they have a 12% market share. Should the central banks in these countries decide to nationalize the Greek banks’ subsidiaries, this would immediately affect the parent-banks in Greece, and would be a fatal blow to the Greek financial system. All four major Greek banks, NBG, Alpha Bank, Piraeus and EFG Eurobank have operations in Romania. According to the Romanian National Bank’s representatives, their local subsidiaries are secured and well capitalized. BNR said it would intervene with all available instruments should these banks show any signs of trouble. editor@romania-insider.com