ECB raises emergency funding for Greek banks by $559 million: source

ATHENS (Reuters) - The European Central Bank raised the cap on emergency liquidity assistance Greek banks can draw from the country's central bank by 500 million euros ($559 million), taking the ceiling to 80.7 billion euros, a banking source told Reuters on Tuesday.

The ECB has raised the cap in increments, keeping pressure on Athens to strike a deal with its creditors over economic reforms required to unlock remaining bailout aid. Last week, it kept the cap unchanged.

"There is an unused liquidity buffer of about 3 billion euros," the source said.

The source said the issue of haircuts - the size of the discount applied to the nominal value of the ELA collateral - was discussed but a decision was postponed.

Hawks on the Governing Council have pushed for raising the haircut which would effectively reduce the value of security that Greek banks can offer and consequently the amount of ELA they can draw down.

(Reporting by George Georgiopoulos; Writing by Karolina Tagaris)