ECB rings collateral changes 14 February 2018Frankfurt Reporter: Brian Bollen
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The European Central Bank has issued a series of amendments relating to the Eurosystem鈥檚 monetary policy implementation.
These include the implementation of previously announced changes to the eligibility criteria of unsecured bank bonds. This decision was previously announced on 14 December last year.
Eurosystem, the eurozone鈥檚 independent monetary authority, is excluding investment funds as eligible issuers and guarantors for the collateralisation of Eurosystem credit operations, taking into account their specific risks related to potential asset portfolio changes.
The Eurosystem is also excluding commercial mortgage-backed securities from collateral eligibility, owing to their relatively complex nature.
It is also amending the rules on the own-use of assets in the collateral framework. Covered bonds that do not meet certain requirements for preferential risk weights under Article 129 of the Capital Requirements Regulation (CRR) will no longer be allowed for own-use.
The own-use of covered bonds meeting the requirements of the CRR and the own-use of non-marketable retail mortgage-backed debt instruments, as well as of certain multi-c茅dulas (debt instruments issued by specific Spanish special purpose vehicles) will continue to be permitted.
In addition, it is changing the use of unsecured bank bonds as collateral. Assets issued by credit institutions that are also recognised agencies in the collateral framework, or multilateral development banks or international organisations, will be exempted from the limit.
The Eurosystem is providing more details on the minimum information that should be provided to the Eurosystem by firms applying for designation as an asset-backed security loan-level data repository.
The other guidelines issued today include details of adjustment to haircuts for floating rate assets and risk control measures for retained covered bonds with extendible maturities.
Also included in the guidelines are amendments to criteria on interest payment structures for eligible credit claims and other technical changes related to the Eurosystem鈥檚 collateral framework.
Joseph Gillingwater, head of international fixed Income securities lending trading at Northern Trust Capital Markets, said: 鈥淎ny changes to the ECB鈥檚 collateral eligibility parameters are keenly scrutinised given the scale of the central bank鈥檚 credit operations and balance sheet."
"Given recent concerns related to the support of company debt and credit markets through its Corporate Sector Purchase Programme (CSPP), it seems only prudent for the ECB to make such changes to the collateral framework in order to exclude riskier or less liquid assets.鈥�
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