by Karl Stagno Navarra & Alessandro Speciale, Bloomberg

European Central Bank officials will debate tighter rules for the liquidity that Greek lenders rely on for survival, two people familiar with the matter said, a move that underscores the fragility of the country’s financial system.

The Governing Council will discuss Wednesday whether to raise discounts on the collateral Greek banks pledge in exchange for emergency funding, said the people, who are familiar with the agenda and asked not to be identified. Governors will also review how much more Emergency Liquidity Assistance to offer Greek banks.

With access to capital markets shut and deposits flowing out of their vaults, Greek banks depend on ELA to stay afloat. While economists say the ECB is unlikely to demand higher haircuts without a green light from Europe’s politicians, the debate shows how concerned some central bankers are about Greece’s solvency 100 days after Prime Minister Alexis Tsipras came to power.

Greek bonds plunged for a second day after Tsipras’s government blamed international creditors for a failure to end an impasse in the country’s bailout talks. The next meeting of European finance ministers is on Monday and a breakdown there could be the trigger for the ECB to tighten collateral rules, said Mujtaba Rahman, an analyst at Eurasia Group.

Monday Milestone

“The important milestone is 11 May,” said Rahman in an e-mail. “The ECB will take its lead from the eurogroup statement at that point. It is very unlikely that the ECB will preemptively tighten the screws on the Greeks today.”

Greek bonds resumed their slide, with the yield on two-year notes rising 66 basis points to 21.64 percent after jumping 149 basis points yesterday. The benchmark stock index slipped 0.4 percent after dropping 3.9 percent on Tuesday, the most in six weeks.

“The situation is getting pretty close to the endgame,” said Gianluca Ziglio, a fixed-income strategist at Sunrise Brokers LLP in London. “The ECB cannot pull the plug at the moment. But at the same they are the ones that could, and they would have to if Greek collateral is not eligible any more.”

Greece is sending mixed signals about just how much money it has left. While officials say they can make payments to the International Monetary Fund this week and next, one policy maker signaled last month that the country may struggle beyond the end of May.

An interest payment of 200 million euros ($225 million) to the IMF by Greece will be made today “as normal,” Alternate Finance Minister Dimitris Mardas said in interview with Mega TV.