Circulaire BCL 2004/184 of 5 March 2004 — Modification of the BCL General Conditions

Luxembourg, 5 March 2004

To all credit institutions and to the financial services of the Post and Telecommunications Company (postal checking account service)

CIRCULAR BCL 2004/184

MODIFICATION OF THE BCL GENERAL CONDITIONS

Dear Sirs,

Following the adoption in February 2004 by the European Central Bank of the document entitled "The implementation of monetary policy in the euro area: General Documentation on the instruments and procedures of the Eurosystem's monetary policy", the BCL General Conditions have been modified.

In addition to various stylistic and linguistic modifications, the General Conditions have undergone more substantial modifications concerning:

• the definition of the reserve maintenance period (which will systematically begin on the settlement day of the main refinancing operation following the Governing Council meeting at which the monthly assessment of the monetary policy stance is on the agenda);

• the standing facilities (the interest rate modifications for the standing facilities will, in principle, take effect at the beginning of the new reserve maintenance period);

• the duration of main refinancing operations (reduced from two weeks to one week);

• the execution date of longer-term refinancing operations (they will be allocated on the last Wednesday of each calendar month);

• the risk control framework applicable to assets eligible for Eurosystem credit operations (liquidity categories will be introduced for Level 1 assets and the haircut levels for Level 1 and Level 2 assets will be revised; the calculation of initial margins for assets pledged as collateral in Eurosystem credit operations will be removed);

• a broader definition of the characteristics of eligible collateral for assets.

The modifications thus made concern primarily the following documents:

• the General Conditions themselves (list of annexes, Chapter 6, Chapter 7, Chapter 8, Chapter 10);

• Annex 2 (ECB Regulation on minimum reserves ECB/2003/9);

• Annex 3 (General Documentation on the instruments and procedures of the Eurosystem's monetary policy of February 2004);

• Annex 8 (2.1., 2.2.1, 3.2.4., 4.1., 4.2.1., 4.4.3., 4.5.2., 4.5.3., 4.5.1., 4.5.2., 5.2.3.,
  5.7., 6.2.1., 7.1., 7.3.2., 7.4., 7.5., 7.6., 7.7., 7.8., 7.9.1., 7.9.2., annexes 1 and 5);

• Annex 11 (CCBM – Procedures for Eurosystem counterparties – September 2003);

• Annex 13 (update of the BCL Swift user guide);

• Annex 14 (Glossary: margin call, reserve base, uniform deduction, marginal lending facility, monetary financial institution, maturity limit, initial margin, variation margin, residual maturity, main refinancing operation, longer-term refinancing operation, reserve maintenance period, reserve ratio, euro area).

We draw your particular attention to the fact that for an asset with collateral to be considered eligible, a legal confirmation regarding the legal validity, binding effect, and enforceability of the collateral must be presented in terms acceptable both in substance and form to the Eurosystem. The necessity of a legal confirmation does not, however, apply to collateral given against debt securities with an individual rating nor to collateral provided by public bodies authorized to collect taxes.

The updated version of the BCL General Conditions for operations is available from 8 March 2004 on the BCL website: www.bcl.lu. A printed version of the updated BCL General Conditions will be communicated to you.

The document "The implementation of monetary policy in the euro area: General Documentation on the instruments and procedures of the Eurosystem's monetary policy" of February 2004 constitutes the new Annex 3 to the BCL General Conditions. Additional copies of this document can be obtained from the BCL (General Secretariat, tel.: 4774-4265).

The revised framework resulting from ECB/2003/16 amending ECB/2000/7 and which contains as an annex the document "The implementation of monetary policy in the euro area", as well as the BCL General Conditions, as modified, enter into force on 8 March 2004.

Please accept, Sirs, the assurance of our most distinguished sentiments.

CENTRAL BANK OF LUXEMBOURG

The Management

Serge KOLB Andrée BILLON Yves MERSCH