European Central Bank adjusts repo collateral framework

The European Central Bank (ECB) is adjusting its collateral framework for repo transactions. For private-sector assets, the ECB will now use the second-best rating from external agencies as a reference point rather than automatically applying the highest rating. This rating will also directly influence the calculation of valuation haircuts.

This change affects various private assets, including unsecured bank bonds, covered bonds, and assets issued by non-financial corporations and the public sector outside the Eurozone. Additionally, the ECB is introducing a climate factor into the Eurosystem's collateral framework and refining the treatment of certain financial subsidiaries to ensure alignment with their non-financial parent companies.

In a separate refinancing operation, the ECB allocated 8.898 billion euros in an 84-day repo transaction. The tender fully met the bids from 58 institutions, providing Eurozone banks with an additional 1.887 billion euros in liquidity.