The European Central Bank continues to normalise its monetary policy. On Thursday 24 March, it announced that it would phase out major easing of the requirements for collateral that banks provide in exchange for liquidity by March 2024.
These easing measures were put in place in April 2020 at the outbreak of the Covid-19 pandemic to allow the banking sector to continue lending to economic operators (see EUROPE 12464/28 and 12473/17).
From 8 July this year, the reduction applied by the ECB to securities provided as collateral will be reduced from 20% to 10% and then eliminated from June 2023. Corporate bonds that before April 2020 met the minimum investment requirements before their ratings were downgraded by the rating agencies because of the pandemic, will no longer be able to be used as collateral for loans to banks from July.
The existing flexibilities to accept household and SME loans as collateral will also be phased out.
Greek securities. The ECB has nevertheless decided to allow euro area central banks to accept as collateral Greek debt securities that do not meet the minimum credit quality requirements but satisfy other eligibility criteria, as long as the amounts invested in Greek debt under the PEPP operation are reinvested.
See the measures taken: https://aeur.eu/f/xe (Original version in French by Mathieu Bion)