Greece's solvency is being called into question, raising the stakes in its battle to avoid default.

The International Swaps and Derivatives Association (ISDA), which oversees complex forms of credit-related trading, has been asked to determine if a Greek 'sovereign credit event' has occurred.

The identities of the people or organisations behind the query is unknown but they are believed to be 'market participants'.

If ISDA agrees that Greece has failed to meet its payment obligations, it could lead to a payout on outstanding Greek Credit Default Swap (CDS) contracts - which are essentially insurance mechanisms to protect against default.

ISDA's deadline for a decision on whether to investigate is 1700 GMT on Wednesday.

The development followed Standard & Poor's decision last night to downgrade the country's debt to below junk status - deciding Greece was in 'selective default'.

It was, S&P said, a reaction to the bond swap plan agreed with private creditors by Athens to reduce its debt burden which will see investors incur losses of up to 75% on existing Greek bonds.

The European Central Bank has said today it will temporarily suspend the eligibility of Greek sovereign bonds as collateral for bank loans.

The ECB moved to reassure banks affected by the move that they could still borrow cash from their national central bank under emergency assistance provisions.

It will start accepting Greek bonds again by mid-March when measures to insure the ECB against losses come into effect.

But the moves do little to inspire confidence over Greece and a Government minister has told Sky News the second financial bailout for his country, worth an additional 130bn euros (£110bn) is not sufficient.