FRANKFURT (MNI) – The following is a press release issued Wednesday
by the European Central Bank where it outlines changes to its collateral
framework. A full table can be found under the following link:

http://www.ecb.int/press/pr/date/2010/html/sp090728_1annex.en.pdf?

988620d599d522d16b6a4361b1e64aed

The Governing Council of the European Central Bank (ECB) has
reviewed the risk control measures in the framework for assets eligible
for use as collateral in Eurosystem market operations. The resulting
changes stem from the biennial review of the Eurosystem risk control
measures and the Governing Councils decision of 8 April 2010 to
introduce graduated valuation haircuts for lower-rated assets.

The new schedule duly graduates haircuts according to differences
in maturities, liquidity categories and the credit quality of the assets
concerned, based on an updated assessment of risk characteristics of
eligible assets and the actual use of eligible assets by counterparties.
The new haircuts will not imply an undue decrease in the collateral
available to counterparties.

Moreover, the definition of liquidity categories for marketable
assets and the application of additional valuation mark-downs for
theoretically valued assets have been fine-tuned following the review.
In particular, all non-Jumbo covered bonds, including structured covered
bonds and multi-issuer covered bonds, together with traditional
(UCITS-compliant) covered bonds, will be classified in liquidity
category III. The additional valuation mark-down of 5% currently applied
to theoretically valued asset-backed securities will be extended to
theoretically valued bank bonds (including uncovered as well as covered
bank bonds, namely Jumbos, traditional and structured covered bonds and
multi-issuer covered bonds).

The new haircut schedule, which will enter into force on 1 January
2011, is annexed to this press release. It contains the valuation
haircuts applied to eligible marketable assets. A separate scheme will
apply to inverse floating rate instruments and is also annexed to this
press release, together with a new haircut schedule for non-marketable
assets.

The Governing Council recalls that, if required, the Eurosystem has
the possibility to limit or exclude the use of certain assets as
collateral in its credit operations, also at the level of individual
counterparties.

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