The European Central Bank (ECB) has concluded another assessment of the risk control measures regarding its collateralised lending activities. The last adjustment occurred in 2022, with changes implemented the following year. This latest review focuses on refining how asset haircuts are calibrated across both marketable and non-marketable instruments, including covered bonds used by their issuers, retained asset-backed securities (ABS), and individual credit claims.
The ECB intends for the revised haircut structure to take effect no earlier than November 2026, giving time for the Eurosystem and participating institutions to adapt their systems and reporting processes. Amendments to the central bank’s legal documentation will be released in advance and published in all official EU languages.
Adjustments to haircuts and classification rules
A key element of the review is the planned recalibration of haircuts for non-owned marketable assets. The updated scale, covering categories I to V, is designed to reflect revised measurements of risk, with distinctions made across credit quality steps and maturities. ECB officials noted that these adjustments are intended to maintain a consistent level of protection across asset classes.
Another area of change concerns the treatment of retained ABS. Under an updated definition, an instrument will be labelled ‘retained’ when the entity presenting the collateral and the originator are the same or have close links. This category will receive a specific haircut schedule rather than being handled through the general framework.
For covered bonds used by their issuers, the current add-on approach will be replaced with a standalone schedule. ECB representatives explained that this is expected to provide a clearer and more risk-sensitive method for assessing such collateral.
The framework for individual credit claims will also be expanded. Haircuts will now vary depending on amortisation structure, credit quality, maturity and the interest-rate profile of each claim. Institutions will be required to supply additional details on amortisation types when submitting these assets.
The ECB states that these updates aim to ensure that collateral posted in Eurosystem credit operations remains widely comparable in terms of risk while preserving adequate availability for counterparties.
