Cash collateral opened to central banks
08 December 2016 Frankfurt
Image: Shutterstock
Eurosystem central banks will now be able to accept cash collateral in their public sector purchase programme’s (PSPP) securities lending facilities, without having to reinvest it in a ‘cash-neutral manner’.
The central banks of Europe, Germany, Ireland, France and Belgium will all open their lending programmes to cash collateral by 15 December.
Spain and the Netherlands will also open their central bank’s lending programmes to cash by this date.
The European Central Bank (ECB) has set the overall limit for lending against cash collateral at €50 billion.
In a statement on the new policy, the ECB said: “To avoid unduly curtailing normal repo market activity, the cash collateral option will be offered at a rate equal to the lower of the rate of the deposit facility, minus 30 basis points (bps), currently -70 bps, and the prevailing market repo rate.
The ECB added that the amendment was aimed at supporting the PSPP as well as the euro area repo market liquidity and functioning.
It also reserved the right to review the decision “in light of operational needs and the level of excess liquidity”.
The central banks of Europe, Germany, Ireland, France and Belgium will all open their lending programmes to cash collateral by 15 December.
Spain and the Netherlands will also open their central bank’s lending programmes to cash by this date.
The European Central Bank (ECB) has set the overall limit for lending against cash collateral at €50 billion.
In a statement on the new policy, the ECB said: “To avoid unduly curtailing normal repo market activity, the cash collateral option will be offered at a rate equal to the lower of the rate of the deposit facility, minus 30 basis points (bps), currently -70 bps, and the prevailing market repo rate.
The ECB added that the amendment was aimed at supporting the PSPP as well as the euro area repo market liquidity and functioning.
It also reserved the right to review the decision “in light of operational needs and the level of excess liquidity”.
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