The European Central Bank said on Monday that it suspended its minimum credit rating threshold on Greek sovereign debt, allowing the country to carry on participating in ECB lending operations even if rating agencies downgrade it further.
The ECB said the suspension will be maintained until further notice. The suspension applies to all outstanding and new marketable debt instruments issued or guaranteed by the Greek government.
The move means Greek debt will remain eligible as collateral for ECB loans irrespective of its rating, which all three ratings agencies have cut as the country's debt crisis has intensified.
The ECB has already lowered the bar on collateral during the financial crisis. Pre-crisis it only took debt rated in the A threshold but has loosened rules to allow banks to borrow ECB money on back of some assets rated as low as BBB-.
Last week Standard & Poor's cut Greek debt to junk status following a further increase in estimates of its fiscal deficit and Moody's had threatened to do the same, prompting speculation that a BBB- threshold might not be low enough to guarantee Greek bonds eligibility as collateral.
UniCredit fixed income analyst Kornelius Purps said he expected the suspension to remain in place for several years.
"I don't know if it was necessary at this time but it takes some pressure off Greek government bonds," he said.
"It highlights the pragmatic and flexible approach of the ECB, so it will not be the ECB that will bring further trouble for euro zone growth."