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Eligibility of collateral in BCL Regulation 2012 / No 12 - 28/09/2012


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Eligibility of collateral

On 14 September 2012, Regulation of the Banque centrale du Luxembourg 2012 / No 12 of 12 September 2012 implementing the Guideline of the European Central Bank of 2 August 2012 on additional temporary measures relating to Eurosystem refinancing operations and eligibility of collateral and amending Guideline ECB/2007/9 (ECB/2012/18) was published in the Mémorial A 200.

This Regulation introduces additional temporary measures relating to refinancing operations with central banks the purpose of which is to ensure the proper functioning of the monetary transmission mechanism.

These measures include, in particular, the following:

  • The Banque centrale du Luxembourg may decide that, under certain conditions, counterparties may reduce the amount of, or terminate, certain longer-term refinancing operations before maturity.
  • Asset-backed securities which do not fulfil the credit assessment requirements laid down in Section 4.5.2. of Appendix 8 to the general operating conditions of the Banque centrale du Luxembourg, but which otherwise comply with all eligibility criteria applicable to asset-backed securities, shall be eligible as collateral for Eurosystem monetary policy operations, provided that they have two ratings of at least triple B, at issuance and at any time subsequently. Additional conditions are introduced by Article 3. 1. a) to d) of the Regulation. Haircuts according to the valuation of the security will however be taken into consideration.
  • A counterparty may not submit asset-backed securities as collateral, if the counterparty or any third party with which it has close links, acts as an interest rate hedge provider in relation to the said security.
  • Under certain conditions (incl. security submitted as collateral has two ratings of at least triple B), the Banque centrale du Luxembourg may accept as collateral asset-backed securities whose underlying assets include residential mortgages or loans to small and medium-sized enterprises (SMEs) or both and which do not fulfil the credit assessment requirements and the requirements referred to in Article 3. 1. a) to d). Only asset-backed securities issued before 20 June 2012, subject to a valuation haircut of 32 %, shall be concerned.
  • The Banque centrale du Luxembourg shall not be obliged to accept as collateral eligible bank bonds guaranteed by a Member State under a European Union/International Monetary Fund programme, or by a Member State whose credit assessment does not comply with the Eurosystem’s benchmark for establishing its minimum requirement for high credit standards for issuers and guarantors of marketable assets.

This Regulation shall enter into force immediately.

Central counterparties and trade repositories

Regulation of the Banque centrale du Luxembourg 2012 / No 11 of 10 July 2012 relating to the supervision of central counterparties and trade repositories in Luxembourg and amending Regulation of the Banque centrale du Luxembourg 2010/No 6 of 8 September 2010 relating to the supervision of payment systems, securities settlement systems and payment instruments in Luxembourg, as amended, was published in the Mémorial A 166 of 13 August 2012.

This Regulation introduces the concept of central counterparties and trade repositories in the supervisory rules of the Banque centrale du Luxembourg. This amending Regulation is part of the implementation of the Proposal for European Market Infrastructure Regulation (EMIR) in Luxembourg. For further information about EMIR, we refer to the communication of 22 February 2012 published by Deloitte UK EMEA Centre for Regulatory Strategy entitled “EMIR - A giant stride forward but further work to do”.

Discover the other topics of this newsletter in the attached PDF.

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