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

    FINMA Approves Merger of Credit Suisse and UBS

    The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.

    March 21, 2023 WebPage Regulatory News

    BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks

    The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.

    March 13, 2023 WebPage Regulatory News

    OSFI Finalizes on Climate Risk Guideline, Issues Other Updates

    The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.

    March 12, 2023 WebPage Regulatory News

    APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates

    The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.

    March 07, 2023 WebPage Regulatory News

    BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending

    BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.

    March 03, 2023 WebPage Regulatory News

    HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks

    The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.

    March 02, 2023 WebPage Regulatory News

    MFSA Sets Out Supervisory Priorities, Issues Reporting Updates

    The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023

    March 02, 2023 WebPage Regulatory News

    German Regulators Issue Multiple Reporting Updates for Banks

    Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022

    March 02, 2023 WebPage Regulatory News

    BCBS Report Examines Impact of Basel III Framework for Banks

    The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.

    February 28, 2023 WebPage Regulatory News

    PRA Consults on Prudential Rules for "Simpler-Regime" Firms

    Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.

    February 28, 2023 WebPage Regulatory News
    RESULTS 1 - 10 OF 8806