FRANKFURT (MNI) – The European Central Bank will maintain laxer
collateral rules beyond the end of 2010, ECB President Jean-Claude
Trichet said Thursday.
As of next year, the central bank will introduce larger haircuts
for lower graded collateral, the president added.
“It is the intention of the ECB’s Governing Council to keep the
minimum credit threshold in the collateral framework at investment grade
level (BBB-) beyond the end of 2010,” Trichet said.
“In parallel, we would introduce, as of January 2011, a graded
haircut schedule, which will continue to adequately protect the
Eurosystem,” he added.
Technical details to the decision will be released after the ECB’s
next Governing Council meeting on April 8, Trichet said.
After the collapse of Lehman Brothers, the central banks had
widened its collateral framework to accept BBB- bonds from accepting
only A-, but it previously had said it would return to regular framework
at the end of this year.
However, concerns that Greek debt could become unacceptable as ECB
collateral had sparked speculation that the ECB would prolong the crisis
framework measure or change their cut-off approach to a sliding scale of
hair-cuts.
Under existing rules, a country must have at least one credit
rating above the ECB’s threshold in order for its bonds to be eligible
as collateral.
At present, Greek debt would still qualify under the pre-crisis
rules, since it has an A2 rating from Moody’s. However, now that
Standard & Poor’s and Fitch have cut their rating to BBB+, a downward
revision from Moody’s would create problems if the ECB were to return to
its initial threshold.
–Frankfurt Newsroom, +49-69-720-142; jtreeck@marketnews.com
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