ECB to keep tight funding grip on Greek banks after 'no'

Euro zone central bank chiefs and ECB President Mario Draghi's executive will likely avoid what some officials describe as the 'nuclear' option of withdrawing existing support, a measure that would trigger their immediate collapse.

The central bankers are also set to discuss increasing the haircut or discount imposed on the collateral Greek banks offer in return for funding.

It may, however, be a largely symbolic step to show that they are reacting to the situation, without substantially curbing banks' access to funds.

The funding pinch on Greek banks keeps pressure on Athens as Tspiras prepares for a meeting of euro zone leaders on Tuesday. As the economy runs out of cash, it risks the creation of an ad-hoc system of IOUs that would further damage the banks' solvency.

It was last week's decision by the ECB to freeze emergency funding that precipitated the closure of National Bank of Greece , Eurobank, Piraeus and Alpha Bank and the imposition of a 60-euro-a-day limit on cash withdrawals.

Greece's financial system has been at the heart of the current crisis, haemorrhaging deposits as relations between the radical left-wing government of Tsipras and its creditors worsened.

In theory, the ECB could demand that banks pay back the money they have lent it -- around 118 billion euros last month -- but the banks would not be able to do so and in seizing the collateral, the ECB would cause the system to collapse.

In practice the ECB is unlikely to take any action that would trigger the sudden demise of Greece's banks.

But if the ECB is to continue feeding Greece's banks with emergency loans then it may call on eurozone governments to guarantee Greek debt, something they would be reluctant to do.

The crisis will come to a head at the very latest on July 20, when Greece needs to repay about 3.6 billion euros in bonds owned by the ECB.

To deal with the banking crisis, the government could convert all the balances in the bank to a new currency but that would likely be at a much lower rate than the euro meaning that depositors would see their savings slashed.