4 ms·

I read a few days back that the European Central Bank also owns a lot of Greek bonds. So it might have a big impact on the financial institutions in the EU. He

• marcamillion 16y ago
  Well...that's not really what this whole crisis is about. The deal with the European Central Bank (ECB) and Greek Bonds is that, basically the ECB is the bank of last resort to European banks. European banks can borrow from the ECB, but they have to post collateral for the loans. Kinda like when you go to buy a house, you have to put down 20% or 30%. Or if you are getting some other loan you have to put some security (like the title of a house or car) to 'secure' the loan. Well, the banks have to do the same thing. The issue with Greek bonds is that the ECB requires the collateral for the assets that banks are allowed to use, to have a certain rating level or above. This article has a nice explanation of what happened: http://www.ft.com/cms/s/0/3797c8d8-37f9-11df-9e8e-00144feabdc0,s01=1.html http://www.ft.com/cms/s/0/3797c8d8-37f9-11df-9e8e-00144feabd... So, basically the ECB knew that Greek bonds were in jeopardy, and in an effort to continue accepting them as collateral from the banks they had to relax their standards. Basically saying you can give us crap in exchange for cash, rather than giving us gold for cash. Hope that makes sense.