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ECB Eases Collateral Requirements

Tyler Durden's picture





 

In an effort to enable every insolvent, illiquid, and in-default institution in Europe to gain access to the seemingly bottomless pit of Trichet's despair, the ECB just dropped a series of eligibility requirements on collateral needs. Somewhat interestingly they dropped the requirement that the collateral be 'traded on a regulated market' - does that mean they will accept defaulted GGBs?

From the ECB:

21 September 2011 - ECB publishes an updated version of the General Documentation

 

The European Central Bank (ECB) has today published an updated consolidated version of “The implementation of monetary policy in the euro area: General documentation on Eurosystem monetary policy instruments and procedures”. The version published today mainly includes changes on 3 aspects:

 

First, the Eurosystem has abolished the eligibility requirement (Sections 6.2.1.5 and 6.2.1.6) that debt instruments issued by credit institutions, other than covered bank bonds, are only eligible if they are admitted to trading on a regulated market. At the same time, the Eurosystem risk control measures for marketable assets (Section 6.4.2) have been amended. Specifically, the Eurosystem has reduced 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 5% of the total value of collateral submitted (instead of 10%, as previously stipulated).

 

Second, the introduction of a common minimum size threshold applicable to all eligible credit claims throughout the euro area has been postponed to 2013 (Section 6.2.2.1).

 

Third, in order to stress the importance of counterparties’ compliance with existing national anti-money laundering/counter terrorist financing (AML/CTF) legislation, a provision has been introduced (Section 1.4) stating that all Eurosystem counterparties are deemed to be aware of, and must comply with, all obligations imposed on them by legislation regarding AML/CTF.

 


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Wed, 09/21/2011 - 09:40 | Link to Comment speconomist
speconomist's picture

Misread headline as Collateral Requiem.

Wed, 09/21/2011 - 09:45 | Link to Comment TruthHunter
TruthHunter's picture

Misread headline as Collateral Requiem.

Are we trying too hard to read between the lines?  

I misread illiquid as illicit.

Wed, 09/21/2011 - 09:43 | Link to Comment Apostle of Unknown
Apostle of Unknown's picture

Finally, a chance to swap my pog collection

Wed, 09/21/2011 - 09:43 | Link to Comment Fips_OnTheSpot
Fips_OnTheSpot's picture

It's scripted! Hollywood couldnt do better.

 

 

Oh wait -- I forgot:

Booom!

Wed, 09/21/2011 - 09:44 | Link to Comment qussl3
qussl3's picture

Making it rain euro style.

Wed, 09/21/2011 - 09:45 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

What's next? Free houses for Gypsies? They won't take 'em those wise nomads.

Fuck Trichet.

Wed, 09/21/2011 - 10:40 | Link to Comment falak pema
falak pema's picture

no point fukking one nutter and not the other bigger nut : Bernanke, the king fiat printer.

Wed, 09/21/2011 - 09:46 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The ECB has agreed to pick up 147 rusting, old power transformers I've been storing for a rainy day.

They're chock full of PCBs.

Trichet will be here to pick them up tomorrow at 8 a.m., and I'll get 84 million EUR for my 'collateral.'

It really surprised me because The Bernank had been not returning my phone calls or emails on a request for a Fed loan.

Wed, 09/21/2011 - 11:06 | Link to Comment EscapeKey
EscapeKey's picture

First, you need to swap them for a debt instrument.

I've got some grade AAAAA++WOULDBUYAGAIN Lehman Bros 10-year debt issues, which I picked up for pennies on par, post-bankruptcy. Great to know I can finally cash in.

Wed, 09/21/2011 - 09:46 | Link to Comment Quintus
Quintus's picture

Could Trichet not have found a more explicit way of announcing the ECB's desperation and panic?  

Seriously, there may possibly be someone out there who does not recognise this as the "Oh my God we're all going to crash and burn!!!" signal it clearly is.

 

Wed, 09/21/2011 - 09:46 | Link to Comment lizzy36
lizzy36's picture

Doesn't the benchmark have to be Defaulted bonds as collateral like bernanke accepted in 2008 http://www.zerohedge.com/article/how-fed-gave-goldman-millions-exchange-defauted-bond-collateral ?

Wed, 09/21/2011 - 11:52 | Link to Comment disabledvet
disabledvet's picture

I think you first have to ask "what is a reserve currency" before you answer that. Indeed a central bank can take "defaulted on" paper. But it can also drive down interest rates to zero and literally "flatten" all banks so called "risk free" returns. This is to be respected precisely because "he don't get paid shit" like "all us big-wigs" (and of course big-wig wannabes). The fact is governments throughout the West were attacked in 2008 and only now as the dust has settled have these governments discovered a: who did it and more importantly b: they will not stop unless and until governments stop them. Needless to say "there's an infinite number of tools in that toolbox."

Wed, 09/21/2011 - 09:49 | Link to Comment Peter K
Peter K's picture

BRING OUT YOUR DEAD :)

Wed, 09/21/2011 - 09:49 | Link to Comment Curtis LeMay
Curtis LeMay's picture

At this point the ECB would probably cash an I.O.U. from Charles Manson...

This is pathetic. Why not just start the printing presses and give the monopoly money away first come first serve?? 

Wed, 09/21/2011 - 09:57 | Link to Comment schadenfreude
schadenfreude's picture

DSK's sperm is admitted as well.

Wed, 09/21/2011 - 09:51 | Link to Comment Fips_OnTheSpot
Fips_OnTheSpot's picture

I had "2008" on the phone - it wants the money back! Collateral damage, bitchez!

Wed, 09/21/2011 - 09:53 | Link to Comment alien-IQ
alien-IQ's picture

A 5 billion Euro ECB loan using 20 goats as collateral. What's not to love about that?

Wed, 09/21/2011 - 09:56 | Link to Comment Vincent Vega
Vincent Vega's picture

Should read: ECB Removes All Collateral Requirements. 

Wed, 09/21/2011 - 09:59 | Link to Comment youngman
youngman's picture

I wonder if they have any used Bunga Bunga party panties they could trade in...they have to be worth quite a lot...

Wed, 09/21/2011 - 10:01 | Link to Comment Alvaro de Esteban
Alvaro de Esteban's picture

A slightly stained Baby wipe will be enough...

 

Wed, 09/21/2011 - 10:04 | Link to Comment Nothing To See Here
Nothing To See Here's picture

I got plenty of ink and paper which I would be glad to give as collateral on my mortgage to my bank. Might work in a future near you.

Wed, 09/21/2011 - 10:09 | Link to Comment gball
gball's picture

Brilliant.  Just brilliant.

Those pesky collateral requirements have been the problem all along.

Everything's fixed now.  The solution to rising leverage due to deposit withdrawls is to allow more leverage to inspire confidence.  This will surely encourage business and consumers to put their deposits back in banks. 

Shoot...I'm opening a BNP checking account right now, cashing all my gold and silver in, and going to put it in their no interest checking account I'm so inspired.

Wed, 09/21/2011 - 10:09 | Link to Comment unununium
unununium's picture

Finally, CDS can be offloaded to the central bank.

Unregulated market.

Then things go boom, and central bank makes all the payouts.

Wed, 09/21/2011 - 10:15 | Link to Comment Calculo Ergo Sum
Calculo Ergo Sum's picture

This is a bazooka exploding in the hands of the shooter.

Wed, 09/21/2011 - 10:17 | Link to Comment Calculo Ergo Sum
Calculo Ergo Sum's picture

This is a bazooka exploding in the hands of the shooter.

Wed, 09/21/2011 - 10:17 | Link to Comment oogs66
oogs66's picture

bring out your dead

Wed, 09/21/2011 - 10:49 | Link to Comment lolmao500
lolmao500's picture

This is ridiculous.

Next, they'll let banks give stars and planets they say they own in other galaxies as collateral.

Wed, 09/21/2011 - 11:25 | Link to Comment Miles Kendig
Miles Kendig's picture

Somewhat interestingly they dropped the requirement that the collateral be 'traded on a regulated market' - does that mean they will accept defaulted GGBs?

Tyler, looks like the ECB may be following in Japanese example and will accept the personal IOU's of leading figures, backed by their personal holdings .. and perhaps the off the books transactions within emerging nations.  Classic tell tale beyond D paper that appears especially noteworthy in the case of France with possible spillover to Austria, Spain and Italy.

Wed, 09/21/2011 - 12:33 | Link to Comment Coldfire
Coldfire's picture

Jean-Claude Dechet, the Gallic Garbagemonger.

Wed, 09/21/2011 - 16:10 | Link to Comment Bunga Bunga
Bunga Bunga's picture

ECB takes even Ruby's hot panties as collateral.

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