* Emergency funds from Greek central jump to 65.6 bln euro in Feb
* Direct borrowing from the ECB drops 53 pct from January
By George Georgiopoulos
ATHENS, March 12 (Reuters) - European Central Bank funding to Greek banks dropped sharply in February from a month earlier while borrowing from the domestic central bank jumped as lenders switched to emergency liquidity assistance (ELA), Bank of Greece data showed on Thursday.
ECB lending to Greek banks against collateral fell 53 percent to 38.61 billion euros ($40.9 billion) from 82.24 billion euros in January, after the ECB stopped accepting Greek government paper as collateral for funding on Feb. 4.
The ECB cut off Greek banks from its funding window after Greece’s new leftist government abandoned the country’s bailout programme, a condition for access to direct ECB funding.
The move forced Greek lenders onto ELA from their national central bank -- a temporary facility that raised pressure on euro zone governments to find a political solution to Greece’s financing crunch before a full-blown banking crisis.
Greek banks can still use their European Financial Stability Facility (EFSF) bonds as collateral with the ECB, which explains their 38.6 billion exposure last month.
Emergency funding from the Greek central bank, which is more costly than ECB funds, rose 12-fold in February to 65.64 billion euros from 5.2 billion in January, the data showed.
Greek banks suffered deposit outflows of 16.2 billion euros in December and January as jitters over the government’s standoff with euro zone partners prompted savers to withdrew cash to stash at home or to send abroad.
Deposit flight continued in February, with official data due out later this month.
The sharp drop in deposit balances, coupled with purchases of state T-bill issues and the refusal of foreign banks to renew repo lines, forced Greek banks to draw the emergency liquidity assistance from the Bank of Greece.
The ECB’s Governing Council raised the bank’s cap on ELA funding by 500 million euros to 68.8 billion euros earlier this month.
In a teleconference on Thursday, the ECB increased the cap on emergency liquidity assistance by another 600 million euros to 69.4 billion, a banking source told Reuters. It will reassess the situation again next week.
The ECB, which has the ability to expand and restrict ELA operations, has raised the cap in increments, keeping pressure on Athens to strike a political accord over its debt woes.
In total, Greek banks’ borrowing from the ECB and the domestic central bank reached 104.3 billion euros in February - a sum equivalent to about 57 percent of the country’s gross domestic product.
The European Central Bank has said it is willing to again accept Greek bonds for funding if Athens keeps to reform pledges. (1 US dollar = 0.9440 euro) (Editing by Crispian Balmer)