By Jonathan Davies

The European Central Bank (ECB) has cut the maximum emergency liquidity assistance (ELA) to Greek banks.

The ECB had been providing €91 billion worth of ELA to Greek banks as cash reserves plummeted, causing banks to close for weeks and resulting in huge queues outside limited ATMs. The limit has now been cut to €89bn following a request from the Greek government.

It is understood that the request from Athens is a sign that banks are now becoming more stable and are rebuilding their cash reserves.

"The ELA cap was lowered, in line with a request by the Bank of Greece, due to improving liquidity conditions," a source told Reuters.

ELA has been crucial to the survival of Greek banks in recent months as the debt crisis reached boiling point over a new bailout deal.

But with governments around Europe set to approve the new bailout, it is hoped that new funds from the bailout will greatly reduce the banking sector's reliance on ELA.