FRANKFURT (MNI) – The following is the verbatim text of the
European Central Bank release on its news collateral framework:

8 April 2010 – ECB introduces graduated valuation haircuts for
lower-rated assets in its collateral framework ?as of 1 January 2011

The Governing Council of the European Central Bank (ECB) has
decided to keep the minimum credit threshold for marketable and
non-marketable assets in the Eurosystem collateral framework at
investment-grade level (i.e. BBB-/Baa3) beyond the end of 2010, except
in the case of asset-backed securities (ABSs). 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 (or equivalent). [1] This graduated haircut schedule will replace
the uniform haircut add-on of 5% that is currently applied to these
assets.

The detailed haircut schedule will be based on the following
parameters:

* The new haircuts will be duly graduated according to differences
across maturities, liquidity categories and the credit quality of the
assets concerned. The lowest haircuts will apply to the most liquid
assets with the shortest maturities, while the highest haircuts will
apply to the least liquid assets with the longest maturities.

* The new haircuts will be at least as high as the haircut
currently applied, which is a flat 5% add-on for the assets concerned
over the haircut that would apply to similar assets with a higher
credit quality.

* No changes will be made to the current haircut schedule foreseen
for central government debt instruments and possible debt instruments
issued by central banks that are rated in the above-mentioned range.

* The new haircuts will not imply an undue decrease in the collateral
available to counterparties.

The specific schedule of haircuts will be published in July 2010.

Furthermore, the Governing Council confirmed that the following
instruments will no longer be eligible as collateral as from 1 January
2011:

* marketable debt instruments denominated in currencies other than
the euro, i.e. the US dollar, the pound sterling and the Japanese yen,
and issued in the euro area;

* debt instruments issued by credit institutions, which are traded
on the accepted non-regulated markets; and

* subordinated debt instruments when they are protected by an acceptable
guarantee.

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