Featured Product

    ECB Announces Package of Temporary Collateral Easing Measures

    April 07, 2020

    The Governing Council of ECB adopted a package of temporary collateral easing measures to facilitate the availability of eligible collateral for Eurosystem counterparties to participate in liquidity providing operations, such as the targeted longer-term refinancing operations (TLTRO-III). To this end, the Governing Council decided on a set of collateral measures to facilitate an increase in bank funding and to temporarily increase its risk tolerance level in credit operations. The measures collectively support the provision of bank lending, especially by easing the conditions at which credit claims are accepted as collateral.

    In this regard, ECB has published a guideline that amends Guideline ECB/2014/31 on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral. ECB has also published a Decision that amends EU guidelines 2015/510 and 2016/65. The emergency collateral package contains three main features. First, the Governing Council decided on a set of collateral measures to facilitate an increase in bank funding against loans to corporates and households. In this respect, the Governing Council decided to temporarily extend the additional credit claims frameworks further by:

    • Accommodating the requirements on guarantees to include government and public-sector guaranteed loans to corporates, small, and medium-sized enterprises (SMEs), and self-employed individuals and households in the additional credit claims frameworks, with the aim to provide liquidity against loans benefiting from the new guarantee schemes adopted in euro area member states as a response to the COVID-19 pandemic.
    • Enlarging the scope of acceptable credit assessment systems used in the additional credit claims frameworks, for example, by easing the acceptance of banks’ own credit assessments from internal rating-based systems that are approved by supervisors.
    • Reducing the additional credit claims loan-level reporting requirements to allow counterparties to benefit from the additional credit claims frameworks, even before the necessary reporting infrastructure is put in place.

    Second, the Governing Council decided to temporarily increase its risk tolerance level in credit operations through a general reduction of collateral valuation haircuts by a fixed factor of 20%. Third, the Governing Council adopted the following temporary measures:

    • A lowering of the level of the non-uniform minimum size threshold for domestic credit claims to EUR 0 from EUR 25,000 previously to facilitate the mobilization as collateral of loans from small corporate entities.
    • An increase, from 2.5% to 10%, in the maximum share of unsecured debt instruments issued by any single other banking group in a credit institution’s collateral pool. This will enable counterparties to benefit from a larger share of such assets.
    • A waiver of the minimum credit quality requirement for marketable debt instruments issued by the Hellenic Republic for acceptance as collateral in Eurosystem credit operations.

    In addition, as part of the regular review of its risk control framework, the Governing Council decided to adjust the haircuts applied to non-marketable assets, both in the general collateral framework and for additional credit claims, by fine-tuning some of the haircut parameters. This adjustment applies in addition to the temporary haircut reduction and thus further supports the collateral easing measures while maintaining adequate risk protection. This leads, on average, to a further haircut reduction of this type of collateral by nearly 20%. Furthermore, the Governing Council has mandated the Eurosystem committees to assess measures to temporarily mitigate the effect on counterparties’ collateral availability from rating downgrades arising from the economic impact of COVID-19, while continuing ensuring collateral adequacy.

     

    Related Links

    Keywords: Europe, EU, Banking, Securities, COVID-19, Credit Risk, TLTRO, Regulatory Haircuts, Counterparty Risk, Collateral Framework, Loan-Level Reporting Requirements

    Featured Experts
    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    HKMA Announces Launch of Data Repository on Sustainable Finance

    The Hong Kong Monetary Authority (HKMA) announced that the Green and Sustainable Finance (GSF) Cross-Agency Steering Group has launched the information and data repositories and outlined the progress made in advancing the development of green and sustainable finance in Hong Kong.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    NGFS Report on Integration of G-Cubed Model into NGFS Scenarios

    The Network for Greening the Financial System (NGFS) published a report that explores the feasibility of integrating the G-Cubed general equilibrium model into the NGFS suite of models.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8301