–Adds quotes from Trichet and additional details of collateral changes
FRANKFURT (MNI} – The European Central Bank will keep the minimum
credit threshold for marketable and non-marketable assets in the
Eurosystem collateral framework at investment-grade level (BBB-) beyond
the end of 2010, except in the case of asset-backed securities (ABS),
President Jean-Claude Trichet confirmed Thursday.
“In addition, the Governing Council has decided to apply, as of 1
January 2011, a schedule of graduated valuation haircuts to the assets
rated in the BBB+ to BBB- range,” Trichet said during his introductory
statement at today’s press conference.
The changes will replace the ECB’s current single add-on haircut of
5% for ratings below A-, Trichet said.
He later said that the new system will mean no change on paper
rated above BBB, meaning that the first haircut — at BBB+ level — will
match the current 5% add-on.
Pressed by reporters asserting that the ECB had abandoned a pledge
to revert to the stricter pre-crisis collateral rules in order to save
Greece, Trichet sought to portray the move as one of conscientious
fiduciary responsibility.
He said the changes essentially meant that the ECB had decided to
maintain the current framework, “with an appreciation of the risks which
are more pertinent than the full-fledged 5% [add-on haircut] that we
have today. It is an improvement in risk assessment by us.”
Trichet also revealed that the ECB has decided, as of the end of
this year, to eliminate the collateral eligibility of foreign-currency
denominated debt instruments and subordinated marketable debt. Both were
added to the collateral basket in an attempt to ease bank financing as
the financial crisis shook global markets towards the end of 2008.
Trichet said the new haircut schedule “will be based on a number of
parameters which are specified in the press release to be published
after today’s press conference.”
–Frankfurt Bureau tel.: +49-69-720 142, email: frankfurt@marketnews.com
[TOPICS: M$X$$$,MT$$$$,M$$EC$,MGX$$$]