The European Central Bank (ECB) has announced measures to harmonize and refine its collateral framework, ensuring more flexibility and risk efficiency. This step marks a further move towards consolidating the temporary collateral easing measures that were introduced in response to financial crises.
In an effort to return to a single collateral list accessible to all euro area counterparties, the ECB’s Governing Council has decided to incorporate certain assets from the temporary measures into the general collateral framework. This integration aligns with the Council’s intention to maintain a broad collateral scope, as previously indicated on March 13, 2024, during the review of the ECB’s operational framework.
The assets now accepted as collateral under the general framework include asset-backed securities with a second-best rating of credit quality step 3 and marketable assets denominated in currencies such as the US dollar, the pound sterling, and the Japanese yen. Additionally, in-house credit assessment systems of national central banks will be recognized as a credit assessment source after the development of a standardized framework.
The Governing Council has tasked Eurosystem committees to prepare for the integration of non-financial corporate credit claim pools into the general framework. The completion of this task, which involves establishing a risk control framework and technical requirements, will be followed by further communication.
Simultaneously, the ECB is discontinuing certain asset types that were eligible under temporary guidelines, such as private individuals and real estate-backed credit claims, as well as foreign currency-denominated loans and individual credit claims with credit quality below step 3.
The ECB also plans to phase out temporary relaxations on technical requirements for additional credit claims, including those with partial public sector guarantees related to COVID-19.
Non-financial corporate credit claim pools and those with COVID-19-related guarantees will remain eligible under the temporary framework until at least the end of 2026, subject to the preparatory work’s conclusion. However, national central banks have the discretion to end their additional credit claim frameworks earlier if they choose.
The implementation of these changes will not commence before the fourth quarter of 2025 and will coincide with the next regular update of the relevant legal frameworks.
The ECB’s Governing Council reaffirms its commitment to a broad collateral framework, which is essential for the smooth execution of Eurosystem credit operations and effective monetary policy. Detailed information regarding these changes will be disseminated to the involved parties by the respective national central banks.
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