FRANKFURT (AFP) - The European Central Bank has increased the volume of emergency liquidity available to Greek banks by €5 billion (S$7.7 billion) , two newspapers reported on Thursday.

The ECB has increased the volume of emergency liquidity assistance (ELA) from €60 billion to €65 billion, the two dailies, Frankfurter Allgemeine Zeitung and Handelsblatt, reported, quoting central bank sources.

The ECB declined to comment on the information.

Last week, the ECB effectively shut off Greek banks from one key channel of financing by saying it would no longer accept Greek sovereign bonds as collateral for loans in its normal refinancing operations.

Greek debt has a junk credit rating and, under ECB rules, should not qualify as collateral for loans, anyway.

But Athens had been granted a special waiver to that that rule as long as it was deemed to be in compliance with the terms of its €240 billion EU-IMF bailout.

In a shock decision, the ECB announced it would now lift that waiver.

The move was seen as a severe blow to Greece and sent the Greek stock market into a tailspin and Greek borrowing costs soaring.

Nevertheless, analysts insisted that the ECB's would not push Greek banks into a liquidity crisis, since they had reduced their exposure to Greek government bonds and had other investment-grade assets which they could use as collateral instead.

According to some estimates, Greek banks were using €8 billion at most in Greek government debt as collateral for loans from the ECB in December, compared with total outstanding loan volume of €56 billion.

Under euro zone rules, banks can also call on the emergency liquidity assistance (ELA) facility for funding, which is granted by a country's central bank following authorisation from the ECB.

The disadvantage with ELA loans is that they are more expensive than the central bank's regular refinancing operations.