Consequences of reinstating ECB’s waiver

An important decision for the ECB in the forthcoming months will concern the waiver on GGBs. At the September ECB press conference, ECB President Mario Draghi stated that such a decision cannot be made during the review process, specifying that "the country has to be in a programme for financial assistance, has to comply with it, and so has to show strong ownership and consistent and significant implementation.

And finally, there has to be a debt sustainability analysis by the Governing Council". In the current context, we believe the ECB is likely to wait for the Eurogroup to award a restructuring of Greece's public debt owned by the official sector (mainly EFSF/ESM) as this would have a significant effect on the Governing Council debt sustainability analysis. 

Barclays says, a positive decision to reinstate the waiver would have the following two important ramifications:
 

• GGBs (but not government-guaranteed bank bonds) would again be eligible at MROs. At this operation, these assets would be applied to a much-reduced haircut (compared with ELA), which would ease banks' liquidity.
   
• After the 20 August €3.2bn repayment to the ECB, ECB holdings of GGBs have fallen slightly below its 33% issuer rule. Hence, once the waiver is reinstated, the ECB could start buying up to c.€1.3bn of GGBs until 19 July 2016. The ECB could buy another c.€0.9bn up to 19 April 2017. Cumulative Greek bond holdings under SMP and QE would prevent the ECB from buying beyond 19 April 2017 under current rules, should the programme be extended until then. A significant bond redemption on 20 July 2017 would allow the ECB to resume purchases from 21 July 2017.