On October 5, 2016, the European Central Bank ("ECB")
stated that it will be making changes to its collateral framework
by revising the collateral eligibility criteria and risk control
measures in relation to senior unsecured debt instruments issued by
credit institutions or investment firms (unsecured bank bonds or
Under the current rules, UBBs will, except for these new
changes, become ineligible on January 1, 2017. The ECB’s
revisions to its collateral framework are aimed at temporarily
maintaining the eligibility of UBBs (including the eligibility of
statutorily subordinated UBBs that are not also contractually
subordinated), beyond January 1, 2017.
Furthermore, UBBs will also be subject to additional risk
control measures to remain eligible. The ECB has decided to reduce,
as of January 1, 2017, the usage limit for uncovered bank bonds
from 5% to 2.5%. The reduction will not apply where:
the value of such assets is equal to or less than €50
million (net of any applicable haircut); or
such assets are guaranteed (by a public sector entity that has
the right to levy taxes) by way of a guarantee that complies with
the provisions of Article 114 of the ECB Guideline on the
implementation of the Eurosystem monetary policy framework.
The changes are expected to come into effect from January 1,
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