FRANKFURT (MNI) – The following is the text of the European Central
Bank’s press release, outlining the new guideline on various monetary
policy instruments and procedures used within the Eurosystem. The
information on the newly adopted guideline can be found on the ECB’s
website: http://www.ecb.int/home/html/index.en.html

NEW PROVISIONS FOR THE FRAMEWORK FOR IMPLEMENTATION OF MONETARY POLICY
IN THE EURO AREA

The Governing Council of the European Central Bank (ECB) has
adopted Guideline ECB/2010/13, amending Guideline ECB/2000/7 on monetary
policy instruments and procedures of the Eurosystem. The Guideline sets
out the principles, instruments, procedures and criteria for the
implementation of the single monetary policy in the euro area, and
contains two annexes:

– Annex 1, entitled “The implementation of monetary policy in the euro
area: General documentation on Eurosystem monetary policy instruments
and procedures” (usually referred to as the “General Documentation”);

-Annex II, entitled “Additional minimum common features”, containing
the features applicable to all contractual and regulatory arrangements
for monetary policy operations.

The amendments introduced by Guideline ECB/2010/13 concern primarily
Annex I – i.e. the General Documentation – and relate, in particular,
to the following four issues:

-Asset-backed securities (ABSs): clearer and more stringent provisions
on the cash flow-generating assets backing ABSs, identifying swaps and
synthetic securities as non-eligible cash flow-generating assets. In
addition, in order to reduce claw-back risk with a view to limiting
credit and legal risks, the amended provisions include restrictions on
the geographical scope of ABS originators and the underlying assets to
the European Economic Area (EEA),

-Close links: the introduction of additional exemptions from the
prohibition of close links. It relates to non-UCITS covered bonds that
fulfil all criteria that apply to asset-backed securities, and are both
backed by residential real estate loans and denominated in euro.

-Discretionary measures: the enhancement of the formulation regarding
the suspension, limitation or exclusion of counterparties and assets on
the grounds of prudence or a default.

-Collateralisation non-compliance: consistency between the treatment of
cases where the counterparty fails to sufficiently collateralise a
liquidity-providing operation on the settlement day, and cases where
the counterparty fails to sufficiently collateralise the operation
during the life of the operation.

The Guideline also introduces some editorial changes into Annex II.

The new provisions will apply as from Sunday, 10 October 2010.

Moreover, the amendments to the General Documentation also relate
to changes introduced as a result of the biennial review of the risk
control measures, announced on 28 July, which will apply as from 1
January 2011.

The Governing Council amends Guideline ECB/2000/7 on a regular
basis, in order to capture in a single legal act the relevant decisions
on monetary policy instruments and procedures taken in the course of the
previous months. The guidelines can be found on the ECBs website.

An updated version of the General Documentation will be published
in January 2011, after all new provisions contained therein have come
into force.

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