ECB decides "not to object" to continued emergency credit for Cyprus banks

FRANKFURT – The European Central Bank gave the green light to continue emergency credit for Cyprus’ banking system.

The decision is a key step ahead of the hoped-for reopening of the country’s banks in the wake of a financial bailout by other euro currency member countries.

The ECB said Monday it “decided not to object” to the Central Bank of Cyprus continuing to provide money under the Emergency Liquidity Assistance credit facility. The credits are made at the local central bank’s own risk, but it needs ECB permission to make such loans.

The lending is a last resort for troubled banks that can’t borrow from other banks and which don’t have the higher quality collateral to tap normal ECB lending.

The emergency credit is a key support measure as it is not clear how many depositors will pull their money out once banks reopen. The credit support would help banks weather that because they could — if they have acceptable collateral — take a euro in emergency credit to replace the euros that frightened or angry depositors might withdraw.

The ECB added that it “acknowledges” the bailout deal and said that “steadfast implementation is key for Cyprus to regain access to financial markets and return to growth as soon as possible.”