FRANKFURT (MNI) – The following is a verbatim text of details of
the European Central Bank’s reactivation of the temporary swap line with
the Federal Reserve:

ECB ANNOUNCES DETAILS REGARDING THE REACTIVATION OF THE US DOLLAR
LIQUIDITY-PROVIDING OPERATIONS

Following the decision of the Governing Council to reactivate the
temporary swap line with the Federal Reserve, the European Central Bank
(ECB) today announces the operational details for its US dollar
liquidity-providing operations.

The operations will be carried out as fixed rate tenders with full
allotment and will take the form of repurchase operations against
ECB-eligible collateral.

The ECB has decided to conduct:

-7-day operations on a weekly basis. The first operation will be held
on 11 May 2010, with settlement on 12 May 2010 and maturity until 20 May
2010. Subsequent operations will as a rule be conducted and allotted on
Wednesdays, for settlement on the following business day.

-An 84-day operation to be held on Tuesday, 18 May 2010, with settlement
on 20 May 2010 and maturity until 12 August 2010. Further information on
tender procedures can be found on the ECB’s website.

TENDER PROCEDURE FOR THE PROVISION OF US DOLLARS TO EUROSYSTEM
COUNTERPARTIES

Following a decision by the ECBs Governing Council, the Eurosystem
central banks will conduct operations with the following
characteristics.

Type: Provision of US dollar term funding to Eurosystem counterparties
against ECB-eligible collateral as set out in Chapter 6 of the General
Documentation on Eurosystem monetary policy instruments and procedures
(the ‘GD’), in accordance with the procedures set out for long term
refinancing operations, in particular in sections 3.1.3 and Chapter 5 of
the GD with the deviations contained in this statement of tender
procedure.

Settlement date: The settlement date will be indicated in the
announcement of each operation. For operations with a duration of
approximately one week: the settlement date will usually be on the
business day following each operations announcement and allotment. For
operations with a duration of approximately 84 days: the settlement date
will usually be on the second business day following each operations
announcement and allotment.

Maturity: The exact maturity will be indicated in the announcement of
each operation.

Type of auction: The auction type will be fixed rate tender and will be
communicated in the announcement of each operation.

Auction details: Fixed rate tender communicated in the announcement of
each operation. The minimum bid amount is equal to USD 5 million. Bids
exceeding this amount must be expressed as multiples of USD 0.1 million.
The publication of the announcement of the tender and the allotment will
take place on wire services.

Maximum amount: No maximum will be applied and the ECB will satisfy all
bids received (i.e. full allotment).

Eligible counterparties: In the euro area, all institutions which are
eligible for the ECBs marginal lending facility and which have provided
their US dollar standard settlement instructions (SSIs) and a Statement
of Acknowledgement (specified below) to their respective national
central bank (NCB) in advance of the bid submission are deemed eligible.

Risk control measures: In the euro area, the usual haircuts as defined
in Section 6.4 of the GD will be applied and in addition an initial
margin of 12% for operations with a duration of approximately one week
and 20% for operations with a duration of approximately 84 days will be
applied to cater for foreign exchange rate risk. For possible operations
with a different duration, the initial margin will be communicated in
the announcement of each operation. The euro value of the USD liquidity
provided will be computed once, on the allotment date, using the rate
for EUR/USD that will be communicated in the tender announcement. While
the collateral position will not be subject to any daily revaluations or
margin calls due to movements in the exchange rate, it will be subject
to the normal daily mark to market valuation and variation margins
applied to Eurosystem eligible collateral. The initial margin therefore
caters for the foreign exchange risk to which the Eurosystem will be
exposed for the whole of the duration of the operation and for the
expected time required to liquidate assets in case of the default of a
counterparty.

For background information on risk control measures please refer to the
Annex to this note.

Settlement details: Similar to the settlement of other Eurosystem
credit operations, there must be a delivery of euro-denominated
collateral by the counterparty in advance of the provision of credit by
the NCB. On the settlement date, market counterparties are required to
deliver eligible euro-denominated collateral to their local NCB by 16:00
Frankfurt time for operations with a duration of approximately 7 or 84
days. Possible changes to this rule will be communicated in the
announcement of each operation. On receipt of such collateral, the NCB
will submit the corresponding US dollar payment instruction to the
Federal Reserve Bank of New York (FRBNY) as soon as possible thereafter
and ideally before 20:00 Frankfurt time on the settlement date. On the
maturity date, market counterparties are required to pay back US dollar
funds to the accounts of NCBs at the FRBNY by 16:00 Frankfurt time.
Market counterparties are advised that in case US dollar funds are
repaid after 16:00 Frankfurt time, the respective NCB cannot guarantee
return of euro-denominated collateral on the maturity date but will aim
to do so on a ‘best effort’ basis.

Legal requirements: The operations set out in this note will take
place in principle using existing legal documentation between the
respective NCB and its eligible market counterparties. If certain NCB
amendments are needed to such legal documentation, the NCBs will
implement such amendments for the purposes of such operations.

Market counterparties wishing to participate in any US dollar
tender are required, before bidding, to provide to their respective NCB
their US dollar SSIs and a Statement of Acknowledgement. In such
Statement of Acknowledgement, market counterparties are required to
explicitly acknowledge V as a condition of their participation in the
tender

-that they are bound by the conditions of the tender set out in this
note and communicated in the tender announcement; and

-the applicability of existing legal documentation between the
counterparty and the NCB to the operation in question (unless amendment
of the legal documentation is necessary).

The provision of US dollar SSIs by market counterparties to their
respective NCB should be effected via SWIFT. The Statement of
Acknowledgement may similarly be communicated via SWIFT or in another
form as required by applicable national laws. In the event of
non-compliance by a counterparty with the requirements set out in this
document, the procedures and sanctions set out in Annex 6 of the GD will
be applicable.

for further details, see link:

http://www.ecb.europa.eu/press/pr/date/2010/html/EUR-USD_tender_

procedure.pdf

[TOPICS: M$$EC$,M$X$$$,M$$CR$,MT$$$$]