(1)

In accordance with Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank, the European Central Bank (ECB) and the national central banks of the Member States whose currency is the euro (hereinafter the ‘NCBs’) may conduct credit operations with credit institutions and other market participants, with lending being based on adequate collateral. The general conditions under which the ECB and the NCBs stand ready to enter into credit operations, including the criteria determining the eligibility of collateral for the purposes of Eurosystem credit operations, are laid down in Guideline (EU) 2015/510 of the European Central Bank (ECB/2014/60) (1).

(2)

All eligible assets for Eurosystem credit operations are subject to specific risk control measures in order to protect the Eurosystem against financial losses in circumstances in which the collateral has to be realised due to an event of default of a counterparty. The Eurosystem risk control framework is regularly reviewed in order to ensure adequate protection. As a result of that regular review, the Governing Council decided on 15 July 2022 to introduce certain changes to the risk control framework.

(3)

The Governing Council decided to further phase out the temporary reduction of valuation haircuts that had been decided as part of the temporary collateral easing measures taken by the Eurosystem in response to the exceptional economic and financial circumstances associated with the spread of coronavirus disease (COVID-19). This is the second step of the gradual phasing out of the valuation haircut reduction that was decided by the Governing Council on 23 March 2022, and will conclude that phasing out.

(4)

As the risk profile of other legislative covered bonds and of multi cédulas is similar to that of jumbo covered bonds, the Governing Council also decided that they should be subject to the same haircut valuations, and therefore all legislative covered bonds and multi cédulas should be included in haircut category II and references to jumbo covered bonds should be removed from Guideline (EU) 2016/65 of the European Central Bank (ECB/2015/35) (2).

(5)

In addition, the Governing Council decided to change the allocation of debt instruments issued by the European Union from haircut category II to haircut category I, given their comparability to debt instruments in the latter category in terms of pricing as well as market and liquidity risk, when controlling for the credit rating or residual maturity of an instrument. This is in line with the risk management principles of protection, consistency, simplicity and transparency which underpin the design of the Eurosystem’s collateral framework, including valuation haircuts.

(6)

In order to allow for a more granular and apposite treatment of the risks associated with long maturity instruments, and thereby improve the risk coverage of the haircuts schedule, it was decided to split the category of instruments with the longest residual maturity, (i.e. more than 10 years ([10, ∞)) into three new categories, ten to 15 years ([10, 15)), fifteen to thirty years ([15, 30)) and thirty years or more ([30, ∞)). This decision, combined with the decision to apply a maturity-dependent theoretical valuation markdown, is also intended to improve the granularity of the risk coverage of that theoretical valuation, which is especially relevant for instruments with longer maturities.

(7)

It was also considered necessary to further specify and adjust the definition of the residual maturity for own-use covered bonds, distinguishing between those with a soft bullet structure, and those with a conditional pass-through structure, in order to avoid an unwarranted increase (i.e. not justified by risk considerations) in the valuation haircuts applied to the latter, as a consequence of the abovementioned splitting up of the category of long maturity debt instruments into three distinct categories.

(8)

Furthermore, the Governing Council decided to replace, in both the permanent and the temporary collateral framework, the current flat 5 % theoretical valuation markdown applicable to marketable assets in accordance with Article 134 of Guideline (EU) 2015/510 (ECB/2014/60) with a maturity-graduated markdown schedule, for all theoretically valued marketable assets except those falling under haircut category I. The reason for this is to protect the Eurosystem’s collateral in a more granular way against model risks arising from theoretical valuation of marketable assets.

(9)

Furthermore, with a view to adequately reflecting the risks of marketable assets with floating coupons, and to improving the risk protection of the Eurosystem, it was decided to align the haircut classification of marketable assets with a fixed coupon and those with a floating coupon, as they demonstrated comparable levels of total risk.

(10)

Therefore, Guideline (EU) 2016/65 (ECB/2015/35) should be amended accordingly,

(1)

in Article 2, points (a), (b) and (c) are replaced by the following:

(2)

Article 3 is replaced by the following:

(3)

Article 4 is replaced by the following:

(4)

in Article 5, paragraph 5 is replaced by the following:

(5)

the Annex is replaced by the Annex to this Guideline.