ECB lowers collateral requirements

The ECB is a key player in the corona crisis in order to keep the economic consequences of the crisis as manageable as possible. To achieve this, its risk appetite continues to rise. This is now also the case with the new rules for collateral requirements.

Long-term liquidity continues to be a bottleneck for banks when granting loans. The ECB has now reacted to this and, following an unscheduled Council meeting, presented measures to make it easier for banks to raise funds on favourable terms by lowering the collateral requirements. This should increase the availability of eligible collateral for banks and thus facilitate their participation in TLTRO III. The package also complements other measures, including additional LTROs and the Pandemic Emergency Purchase Programme (PEPP). The measures support the provision of bank loans, in particular by relaxing the conditions under which loans are accepted as collateral. At the same time, the Eurosystem is increasing its risk tolerance by consistently reducing the valuation haircuts applied to all collateral. State-guaranteed and publicly guaranteed loans will now be accepted as collateral. The minimum creditworthiness requirement for Greek government bonds is waived. In addition, it was decided to reduce the valuation haircut for collateral by a flat 20%.

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