ECB eases rules on collateral from banks

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The European Central Bank said Wednesday it had decided to relax the rules on debt instruments used by financial institutions as collateral for borrowing from the bank.

The ECB said in a statement it had abolished the eligibility requirement that debt instruments -- other than covered bank bonds -- were only eligible if they are admitted to trading on a regulated market.

At the same time, the ECB tightened risk control measures for marketable assets by reducing the limit for the use of unsecured debt instruments issued by a credit institution or by any other entity with which the credit institution has close links.

"Such assets may only be used as collateral to the extent that the value assigned does not exceed five percent of the total value of collateral submitted, instead of 10 percent as previously stipulated," the statement said.

The changes, which are to take effect from January 1, 2012, come amid concerns that some European banks could be having difficulty accessing funds in the inter-bank money market.

© 2011 AFP

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