Regulation of the Central Bank of Luxembourg 2024 No. 34 of 3 May 2024 amending the Regulation of the Central Bank of Luxembourg 2014 No. 18 of 21 August 2014 implementing ECB/2014/31 on additional temporary measures concerning Eurosystem refinancing operations and collateral eligibility

Regulation of the Central Bank of Luxembourg 2024 / No. 34 of 3 May 2024 amending the Regulation of the Central Bank of Luxembourg 2014 / No. 18 of 21 August 2014 implementing ECB/2014/31 on additional temporary measures concerning Eurosystem refinancing operations and collateral eligibility.

The Directorate of the Central Bank of Luxembourg,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 127(2), first indent, and 130;

Having regard to the Statute of the European System of Central Banks and of the European Central Bank, and in particular Articles 3.1, first indent, and Articles 5.1, 12.1, 14.3 and 18.2;

Having regard to the Law of 23 December 1998 on the monetary status and the Central Bank of Luxembourg (hereinafter the "Central Bank"), as amended, in particular Articles 2(1), 2(2) and 34(1);

Whereas:

(1) Under Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank, the European Central Bank (ECB) and the national central banks of the Member States whose currency is the euro (hereinafter the "NCBs") may, in order to achieve the objectives of the European System of Central Banks, conduct credit operations with credit institutions and other market participants on the basis of appropriate collateral for loans. The general conditions under which the ECB and the NCBs are willing to conduct credit operations, including the criteria determining the eligibility of collateral for Eurosystem credit operations, are defined in European Central Bank (ECB/2014/60) Guideline (EU) 2015/510 1. The additional temporary measures concerning Eurosystem refinancing operations and collateral eligibility are defined in European Central Bank Guideline ECB/2014/31 2.

(2) Guideline ECB/2014/31 provides that NCBs may accept certain short-term debt securities issued by non-financial corporations as collateral for Eurosystem monetary policy operations, which do not meet the eligibility criteria applicable to marketable assets, provided that they meet the eligibility criteria and risk control measures that meet the minimum standards specified by the Governing Council. The Governing Council decided on 30 November 2023 to end the acceptance of such short-term debt securities as collateral for Eurosystem monetary policy operations. In reaching this decision, it took into account the following elements regarding said instruments: their negligible contribution over time to the total amount of collateral mobilised by Eurosystem counterparties, as well as their idiosyncratic nature, which was not considered consistent with the principles of consistency and simplicity underlying the design of the Eurosystem collateral framework.

(3) It is appropriate to further clarify the treatment of interest rate benchmarks with regard to the eligibility of collateral for Eurosystem monetary policy operations.

(4) On 8 September 2023, the issuer rating of the Hellenic Republic was upgraded to credit quality step 3 in the Eurosystem harmonised rating scale. Following this upgrade, marketable debt securities issued by the central administration of the Hellenic Republic became compliant with the Eurosystem credit quality requirements and should be subject to the haircuts specified in European Central Bank (ECB/2015/35) Guideline (EU) 2016/65 3. Consequently, the provisions of Guideline ECB/2014/31 authorising NCBs to accept as eligible collateral, for the purposes of Eurosystem credit operations, marketable debt securities issued by the central administration of the Hellenic Republic that do not meet the Eurosystem credit quality requirements applicable to marketable assets but meet all other eligibility criteria applicable to marketable assets, subject to a specific haircut table, have become obsolete and should be removed from this Guideline.

(5) Since Guideline ECB/2014/31 has been amended accordingly by Guideline ECB/2024/6, it is appropriate to implement the new measures by amending the Regulation of the Central Bank of Luxembourg 2014 / No. 18 of 21 August 2014 implementing Guideline ECB/2014/31 on additional temporary measures concerning Eurosystem refinancing operations and collateral eligibility, as amended.

HAS ADOPTED THIS REGULATION:

Art 1. - Amendments

The Regulation of the Central Bank of Luxembourg 2014 / No. 18 of 21 August 2014 is amended as follows:

1. Article 5 is deleted;

2. In Article 7, paragraph 3 is replaced by the following text:

"3. The marketable debt securities described in paragraph 1, bearing coupons indexed to a single money market rate whose use is authorised in the Union in accordance with Regulation (EU) 2016/1011 of the European Parliament and of the Council (*) in the currency in which the securities are denominated, or indexed to an inflation index that does not have coupon structures such as discrete range, range accrual, ratchet or other similar complex structures for the country concerned, also constitute eligible collateral for the purposes of Eurosystem monetary policy operations.

(*) Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in the context of financial instruments and financial contracts or for measuring the performance of investment funds and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (OJ L 171, 29.6.2016, p. 1).";

3. Article 8a is deleted;

4. Annex IIter is deleted.

Art. 2. - Entry into force

This Regulation shall enter into force on 6 May 2024.

Art. 3. - Publication

This Regulation shall be published in the Official Journal of the Grand Duchy of Luxembourg and on the website of the Central Bank (www.bcl.lu).

Central Bank of Luxembourg
The Directorate

1 European Central Bank Guideline (EU) 2015/510 of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (Guideline on general documentation) (ECB/2014/60) (OJ L 91, 2.4.2015, p. 3).
2 European Central Bank Guideline of 9 July 2014 on additional temporary measures concerning Eurosystem refinancing operations and collateral eligibility and amending Guideline ECB/2007/9 (ECB/2014/31) (OJ L 240, 13.8.2014, p. 28).
3 European Central Bank Guideline (EU) 2016/65 of 18 November 2015 on the haircuts applied in the implementation of the Eurosystem monetary policy framework (ECB/2015/35) (OJ L 14, 21.1.2016, p. 30).