The European Central Bank will end most of the looser bank funding rules it introduced in response to the coronavirus pandemic, further reducing its economic and financial support despite fears that the war in Ukraine will wreak major disruption.

The move shows that while the war in Ukraine is expected to slow growth and increase inflation, ECB officials believe the euro zone’s financial system shows few signs of undue stress and is in better-than-expected condition after weathering the Covid-19 crisis .

ECB Say It will phase out many of the Variety It was launched in April 2020. The looser rules are aimed at preventing the pandemic from turning into a debt crisis by increasing the more than 240 billion euros of collateral banks can use to raise cheap money from the central bank.

However, it said Greek government bonds would continue to be accepted as collateral until at least the end of 2024, although they do not meet its minimum credit quality requirements because they are rated below investment grade.

The central bank has announced plans Stop all net bond purchases In the third quarter of this year, interest rates may rise for the first time in more than a decade. It also plans to stop lending to banks at an all-time high rate of minus 1 percent from June.

“This phasing out has given eurosystem counterparties ample time to adapt,” the ECB said, adding that its Governing Council had “considered in a forward-looking manner” the impact of its latest decision on bank access capabilities. Impact. its refinancing facility.

The phase-out will begin in July, when the ECB will increase valuation discounts, or discounts, that apply to assets banks use as collateral and will no longer accept “fallen angel” bonds that lost their investment-grade ratings after the pandemic hit.

The process will end in March 2024, when the ECB will stop accepting additional forms of collateral, such as loans guaranteed by governments and public sector institutions.

The European Central Bank has already said it will halt most of its net asset purchases under its 1.85 billion-euro pandemic emergency program at the end of this month, which enabled it to buy Greek government bonds for the first time in nearly a decade.

investors have Worry That could mean the ECB stops buying Greek bonds or accepts them as collateral. But it said this month it would continue to use proceeds from maturing bonds to buy some Greek bonds until those reinvestments end in 2024.

The central bank also sent a clear signal that it can still buy its bonds if other governments are downgraded to below investment grade, saying it “reserves the right to deviate from the ratings of credit rating agencies if necessary in the future according to its discretion in the monetary policy framework.” to avoid mechanical reliance on these ratings.”

Euro zone government bonds take a hit massive sell-off That underscores investor concerns that the European Central Bank and other central banks plan to scrap most of the additional stimulus they have provided to combat the pandemic since the start of the year, including massive bond purchases.