Decision No. 2019-02 amending Decision No. 2016-02 on valuation haircuts applied during the implementation of the Eurosystem monetary policy

Decision No. 2019-02 of 5 August 2019 amending Decision No. 2016-02 of 25 January 2016 on valuation haircuts applied during the implementation of the Eurosystem monetary policy

THE GOVERNOR OF THE BANK OF FRANCE

Having regard to:

• the Treaty on the Functioning of the European Union, and in particular Articles 127(1) and 127(2), first indent,
• the Statute of the European System of Central Banks and of the European Central Bank (ECB), and in particular Articles 3.1, first indent, 12.1, 14.3 and 18.2,
• ECB Guideline (EU) 2015/510 of 19 December 2014 on the implementation of the Eurosystem monetary policy framework (ECB/2014/60), as amended,
• ECB Guideline (EU) 2016/65 of 18 November 2015 on haircuts applied during the implementation of the Eurosystem monetary policy framework (ECB/2015/35), as amended,
• ECB Guideline of 10 May 2019 amending Guideline (EU) 2016/65 on haircuts applied during the implementation of the Eurosystem monetary policy framework (ECB/2018/4),
• the Monetary Agreement between the European Union and the Principality of Monaco of 26 December 2001, as amended on 29 November 2011,
• the Monetary and Financial Code, and in particular Article L. 142-8,
• the Governor of the Bank of France Decision No. 2015-01 of 22 April 2015 on the implementation of the Bank of France's monetary policy and intraday credit, as amended,
• the Governor of the Bank of France Decision No. 2016-02 of 25 January 2016 on valuation haircuts applied during the implementation of the Eurosystem monetary policy, as amended,

HEREBY DECIDES:

Article 1

The Governor of the Bank of France Decision No. 2016-02 of 25 January 2016 on valuation haircuts applied during the implementation of the Eurosystem monetary policy (hereinafter "the Decision") is amended as follows:

1. Article 2 is amended as follows: a) point (b) is replaced by the following text: "(b) debt securities issued by: i) local and regional authorities; ii) entities, which are credit institutions or other than credit institutions, classified as agencies by the Eurosystem and which meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/510 (ECB/2014/60); iii) multilateral development banks and international organisations; as well as 'jumbo' type covered bonds complying with the UCITS Directive, are included in haircut Category II;"

   b) point (c) is replaced by the following text: "(c) covered bonds complying with the UCITS Directive, other than 'jumbo' type covered bonds; other covered bonds; and debt securities issued by i) non-financial corporations, ii) public sector corporations and iii) agencies other than credit institutions that do not meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/510 (ECB/2014/60), are included in haircut Category III;"

   c) point (d) is replaced by the following text: "(d) unsecured debt securities issued by: i) credit institutions; ii) agencies that are credit institutions that do not meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/10 (ECB/2014/60); and iii) financial corporations other than credit institutions, are included in haircut Category IV;"

2. Article 5 is amended as follows: a) paragraph 1 is replaced by the following text: "1. Individual private claims are subject to specific haircuts, determined according to the residual maturity, the credit quality tier and the interest rate structure, as indicated in Table 3 of the Annex to this Guideline."

   b) paragraph 2 is replaced by the following text: "2. The following provisions apply regarding the interest rate structure of private claims: a) zero-coupon private claims are treated as fixed-rate private claims; b) variable-rate private claims with a reset period greater than one year are treated as fixed-rate private claims; c) capped variable-rate private claims are treated as fixed-rate private claims; d) variable-rate private claims with a floor but no cap, and with a reset period of one year or less, are treated as variable-rate private claims; e) the haircut applied to a private claim giving rise to more than one type of interest payment is solely a function of the interest payments during the residual life of the private claim. If there is more than one type of interest payment during the residual life of the private claim, the remaining payments are treated as fixed-rate payments, the maturity taken into account for the haircut being the residual maturity of the private claim."

   c) paragraph 3 is deleted; d) paragraph 4 is deleted; e) in paragraph 7, the words "paragraphs 1 to 4 above" are replaced by the words "paragraphs 1 and 2";

3. The Annex is amended in accordance with the Annex to this Decision.

Article 2

Publication and entry into force

1. This Decision shall be published in the Official Publication Register of the Bank of France.
2. It shall enter into force on 5 August 2019.
3. This Decision shall apply in the overseas departments and regions, in Saint-Barthélemy, in Saint-Martin, in Saint-Pierre-and-Miquelon, as well as in the Principality of Monaco.

Done at Paris, 5 August 2019

The Governor of the Bank of France François VILLEROY DE GALHAU

Annex

The Annex to Decision No. 2016-02 is amended as follows:

1. Table 1 is replaced by the following table:

"Table 1 Haircut categories applicable to eligible negotiable assets according to the type of issuer and/or the type of asset

Category I: Debt securities issued by central administrations Category II: ECB debt certificates; Debt certificates issued by NCBs before the date of adoption of the euro in their respective Member State Category III: Debt securities issued by local and regional authorities; Debt securities issued by entities (credit institutions or other than credit institutions) classified as agencies by the Eurosystem and which meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/510 (ECB/2014/60); Debt securities issued by multilateral development banks and international organisations; 'Jumbo' type covered bonds satisfying the criteria applicable to UCITS Category IV: Covered bonds complying with the UCITS Directive other than 'jumbo' type covered bonds; Other covered bonds; Debt securities issued by non-financial corporations, public sector corporations and agencies other than credit institutions that do not meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/510 (ECB/2014/60). Unsecured debt securities issued by credit institutions, and agencies that are credit institutions that do not meet the quantitative criteria set out in Annex XII bis to Guideline (EU) 2015/510 (ECB/2014/60). Unsecured debt securities issued by financial corporations other than credit institutions. Asset-backed securities"

2. Table 2 is replaced by the following table:

"Table 2 Haircut rates applied to eligible negotiable assets of haircut Categories I to IV

Haircut Categories Credit Quality Residual Maturity (in years) (*)

Category I Category II Category III Category IV

Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon

Tiers 1 and 2 [0-1) 0.5 1.0 7.5 [1-3) 1.0 2.0 0.5 1.5 2.5 1.0 2.0 3.0 1.0 10.0 10.5 7.5 [3-5) 1.5 2.5 0.5 2.5 3.5 1.0 3.0 4.5 1.0 13.0 13.5 7.5 [5-7) 2.0 3.0 1.0 3.5 4.5 1.5 4.5 6.0 2.0 14.5 15.5 10.0 [7-10) 3.0 4.0 1.5 4.5 6.5 2.5 6.0 8.0 3.0 16.5 18.0 13.0 [10,∞) 5.0 7.0 2.0 8.0 10.5 3.5 9.0 13.0 4.5 20.0 25.5 14.5

Haircut Categories Credit Quality Residual Maturity (in years) (*)

Category I Category II Category III Category IV

Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon Fixed Coupon Zero Coupon Variable Coupon

Tier 3 [0-1) 6.0 7.0 8.0 13.0 [1-3) 7.0 8.0 6.0 9.5 13.5 7.0 12.0 15.0 8.0 22.5 25.0 13.0 [3-5) 9.0 10.0 6.0 13.5 18.5 7.0 16.5 22.0 8.0 28.0 32.5 13.0 [5-7) 10.0 11.5 7.0 14.0 20.0 9.5 18.5 26.0 12.0 30.5 35.0 22.5 [7-10) 11.5 13.0 9.0 16.0 24.5 13.5 19.0 28.0 16.5 31.0 37.0 28.0 [10,∞) 13.0 16.0 10.0 19.0 29.5 14.0 19.5 30.0 18.5 31.5 38.0 30.5

(*) That is, [0-1) residual maturity less than one year, [1-3) residual maturity equal to or greater than one year but less than three years, etc."

3. Table 3 is replaced by the following table:

"Table 3 Haircut rates applied to eligible private claims with fixed or variable interest payments

Credit Quality Residual Maturity (in years) * Fixed Interest Payments Variable Interest Payments

Tiers 1 and 2 (AAA to A-) [0-1) 12.0 12.0 [1-3) 16.0 12.0 [3-5) 21.0 12.0 [5-7) 27.0 16.0 [7-10) 35.0 21.0 [10,∞) 45.0 27.0

Tier 3 (BBB+ to BBB-) [0-1) 19.0 19.0 [1-3) 33.5 19.0 [3-5) 45.0 19.0 [5-7) 50.5 33.5 [7-10) 56.5 45.0 [10,∞) 63.0 50.5

• That is, [0-1) residual maturity less than one year, [1-3) residual maturity equal to or greater than one year but less than three years, etc."