ECB to Phase Out Collateral Measures, Restrict Business of RCB Bank
The European Central Bank (ECB) announced its decision to phase out pandemic-induced temporary collateral easing measures by March 2024, along with certain decisions related to the RCB Bank phasing out its banking operations.
The collateral easing measures will be phased out in the following three steps while ECB will continue to waive minimum credit quality requirement for Greek government bonds, allowing national central banks to accept them as collateral in line with continued eligibility in pandemic emergency purchase program (PEPP):
- In Step 1 of the collateral easing measures, ECB will implement set of decisions from July 08, 2022: temporarily reduce collateral valuation haircuts across all assets from the current 20% adjustment to 10%; discontinue maintaining the eligibility of marketable assets that fulfilled minimum credit quality requirements; restore the limit with respect to unsecured debt instruments issued by any single other banking group in a credit institution’s collateral pool from 10% to 2.5%; and phase out technical requirements for the eligibility of additional credit claims, mainly relating to fully restoring the frequency of the additional credit claims loan level reporting requirements and the acceptance requirements for banks’ own credit assessments from internal rating-based systems.
- In Step 2, ECB expects to implement a new valuation haircut schedule based on its pre-pandemic risk tolerance level for credit operations, phasing out the remaining general 10% reduction in collateral valuation haircuts by June 2023.
- In Step 3, ECB plans to phase out the remaining pandemic collateral easing measures by March 2024, following a comprehensive review of the additional credit claims frameworks; the review will take into account counterparties’ collateral needs for their continued participation in the outstanding targeted longer-term refinancing operations (known as TLTRO III) operations until December 2024.
As part of the decision on RCB Bank, ECB has decided to
- grant RCB Bank permission to sell a part of its performing loan portfolio to Hellenic Bank Public Company Ltd. RCB Bank requested ECB approval after both entities agreed on the sale. According to RCB Bank’s voluntary phasing-out plan, the sales operation will ensure it has enough liquidity to repay its clients’ deposits in full.
- restrict the bank’s business to avoid risks emerging during the bank’s phasing-out process. Therefore, RCB Bank will not be able to accept new deposits, grant new loans, or make new investments.
- appoint a temporary administrator to closely monitor RCB Bank’s liquidity position and capital position and to oversee the orderly repayment of its depositors. The temporary administrator will not replace the current management body, but instead work with it and support the orderly implementation of the bank’s voluntary phasing-out plan.
Related Links
Keywords: Europe, EU, Banking, Covid-19, Basel, Credit Risk, PEPP, TLTRO III, RCB Bank, Liquidity Risk, Collateral Framework, Counterparty Risk, Resolution Framework, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
ECB Issues Opinion on Proposed Amendments to CRRRelated Articles
OSFI Issues Phase2 Consultation on Climate Scenario Exercise for Banks
The Office of the Superintendent of Financial Institutions (OSFI) recently announced a consultation on the second phase of the Standardized Climate Scenario Exercise (SCSE) for banks and other financial institutions it regulates in Canada.
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
