FRANKFURT (MNI) – The European Central Bank today announced a
change in monetary policy regulations that both eases and tightens rules
governing eligibility of debt instruments as collateral.

The central bank said it was dropping a requirement that debt
securities issued by banks — with the exception of covered bonds — be
traded on a regulated market. At the same time, the ECB reduced the
volume of self-generated bank collateral — ie, debt issued by a bank or
by another entity with close ties to the bank — that is eligible in its
refinancing operations. Such debt securities now cannot surpass 5% of
the total value of collateral submitted by a given bank, down from 10%.

A verbatim text of the ECB’s announcement follows:

The European Central Bank (ECB) has today published an updated
consolidated version of “The implementation of monetary policy in the
euro area: General documentation on Eurosystem monetary policy
instruments and procedures.”

“The version published today mainly includes changes on 3 aspects:
First, the Eurosystem has abolished the eligibility requirement
(Sections 6.2.1.5 and 6.2.1.6) that debt instruments issued by credit
institutions, other than covered bank bonds, are only eligible if they
are admitted to trading on a regulated market. At the same time, the
Eurosystem risk control measures for marketable assets (Section 6.4.2)
have been amended. Specifically, the Eurosystem has reduced the limit
for the use of unsecured debt instruments issued by a credit institution
or by any other entity with which the credit institution has close
links. Such assets may only be used as collateral to the extent that the
value assigned does not exceed 5% of the total value of collateral
submitted (instead of 10%, as previously stipulated).

Second, the introduction of a common minimum size threshold
applicable to all eligible credit claims throughout the euro area has
been postponed to 2013 (Section 6.2.2.1).

Third, in order to stress the importance of counterparties’
compliance with existing national anti-money laundering/counter
terrorist financing (AML/CTF) legislation, a provision has been
introduced (Section 1.4) stating that all Eurosystem counterparties are
deemed to be aware of, and must comply with, all obligations imposed on
them by legislation regarding AML/CTF. The updated version of the
“General Documentation” will apply from 1 January 2012 and can be found
on the ECB’s website.”

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