ECB temporarily suspends Greek debt as collateral (by William L. Watts)

FRANKFURT (MarketWatch) -- The European Central Bank on Tuesday said it has temporarily suspended the eligibility of Greek government debt for use as collateral in its lending operations. The move comes a day after ratings firm Standard & Poor's declared Greece to be in selective default after inserting collective action clauses into existing bonds. Banks must post eligible collateral in return for central bank funds via the ECB's lending operations. The ECB said national central banks would be able to satisfy liquidity needs through the Eurosystem's emergency liquidity assistance program. The ECB said Greek bonds will regain eligibility once a collateral enhancement program approved by European leaders becomes operational. The program is expected to be put in place by mid-March 2012, the ECB said.