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Additional liquidity amounting to 15-20 billion Euros for the local banking market will be allocated by the European Central Bank as part of implementing its decision to increase the value of securities, which Greek financial institutions have deposited to generate liquid resources.

The move represents a very positive message sent by the European Central Bank to markets on the prospects of the Greek economy after the procedure and the application of the PSI rescue programme.

Moreover, it comes at a time when the market is literally suffocating, and banks are under pressure after the PSI+. It is expected that this decision will give some fresh breath to the problems with liquidity.

The increasing of the assessment relates to securities received by the banks within the economic aid packages for the financial credit system, aiming to strengthen their liquidity.

Capital granted by the European Central Bank as loans to the Greek banking system depends on a price Eurosystem deems fair.

The market value of securities deposited in the European Bank will be cut in order to obtain the amount that can be given as a loan.

At this stage, Greek banks can borrow mainly through the extraordinary mechanism for support of the Bank of Greece, since lowering the credit rating of the country due to PSI temporarily removed them from the loans of the European Central Bank.

However, prospects for liquidity, received through the Eurosystem, are positive, because the suspension is temporary and it is possible that debasement of bonds will be neutralized and improved in the near future.

On the other hand, there will be a relief from the expected return of deposits in the system since the danger of an uncontrolled bankruptcy after successful completion of the PSI has passed.

Meanwhile, creditors, who have bought insurance against default (CDS) on Greek government bonds, will learn on Monday how much they will receive after their activation and the corresponding tender is expected to allay concerns in the markets in this matter. It is believed that the holders of insurance against default will receive a total of about 2.5 billion US Dollars in the next "act" of the Greek debt restructuring - a procedure that previously senior officials were very worried it might lead to the crash of the Euro currency.

The greatest concern was that the activation of the insurance against default will cause a chain reaction with unpredictable consequences.

"Something like this is happening for the first time to a country from the Eurozone. This is a great event if we remember where we started. We made a 180 degrees turn: the European Central Bank would not want this to happen", said an analyst at a London bank.

However, payment of the insurance is not expected to cause chaos, as originally feared by Eurozone and European Central Bank politicians, because it is only a drop in the ocean compared to the losses reported by creditors in the programme for bond exchange (PSI).

Despite the successful PSI, however, the final amount CDS holders will receive is expected to show that the market believes that the restructuring of the Greek debt did not provide the fiscal stability of the country.

"The opinion of the market is that while deletion of 100 billion Euros debt is a positive step, the country is again at the beginning, a fact which shows that it will be very difficult to make its debt viable", said Gary Jenkins, director of Swordfish Research.

Tender on Monday

On Monday, CDS buyers and sellers will participate in a complex tender in which the bonds will be bought and sold so as to determine a final price, or "rate for the reverse acquisition" of the Greek bonds.
Based on this rate, CDS holders will receive cash to compensate them for losses suffered after the devaluation of the nominal value of the bonds held by them.

Based on the current price of Greek bonds, it is expected that the rate of reacquisition will be around 23 percent, which means that a holder of an insurance against default of 10 million US Dollars will receive 7.7 million US Dollars from the one who sold him the insurance.

The total net compensation could amount to 2.5 billion US Dollars, based on the net value of outstanding CDS, or 3.18 billion US Dollars by the Depository Trust & Clearing Corporation - DTCC.

"The tender will give everyone an opportunity to get rid of or buy a large quantity of securities at a good price", Michael Hayden-Turner from Citigroup told "Reuters".

The final results of the tender are expected to be announced on Monday afternoon and the final payments will be made on March 26.