Circulaire BCL 2005/188 of 13 May 2005 — Modification of the General Conditions of the BCL

Luxembourg, 13 May 2005
To all credit institutions and to the financial services of the Post and Telecommunications Company (postal checking account service)

CIRCULAR BCL 2005/188
MODIFICATION OF THE GENERAL CONDITIONS OF THE BCL

Ladies and Gentlemen,

Following the adoption in February 2005 by the European Central Bank of the document entitled "The implementation of monetary policy in the euro area: General Documentation on the Eurosystem's monetary policy instruments and procedures", the General Conditions of the BCL have been modified.

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

These modifications concern essentially the rules relating to eligible assets and are linked to the introduction of the first phase of adoption of the "single list of collateral" within the framework of the Eurosystem's monetary policy. Other amendments relate to the definition of close links and guarantors in counterparty relationships, the extension by 30 minutes of the execution time for rapid call auctions, and the updating of legal references.

The modifications relating to the introduction of the single list of collateral comprise the following four measures:

• the introduction into the list of Level 1 eligible assets of a new category of assets previously ineligible, namely euro-denominated debt securities issued by borrowers established in G10 countries not belonging to the European Economic Area (EEA);
• the implementation of the principles used by the Eurosystem to assess the acceptability of non-regulated markets with regard to the Eurosystem's collateral management mission;
• the easing of the criterion relating to Level 1 assets requiring that a "issue" or "programme" rating (by a rating agency) be assigned to each debt security issued by a credit institution. An "issuer" rating will suffice; and
• the withdrawal of equities (with effect from 30 April 2005) from the list of Level 2 collateral of central banks that currently accept these assets as eligible collateral for Eurosystem credit operations.

As a result of the first measure, certain euro-denominated debt securities issued by borrowers established in Canada, Japan, Switzerland, and the United States will be integrated into the list of eligible assets. The Eurosystem will examine the legal regime applicable to the issuers of these debt securities in order to ensure appropriate protection of its rights. If a counterparty wishes to use debt securities not listed in the list of eligible assets, it must contact its national central bank (NCB) to inquire about the procedures to be followed for their possible inclusion in the list. Shortly after 30 May, the ECB will communicate the exact date of the introduction, into the list of eligible assets, of the first euro-denominated debt securities issued by borrowers established in G10 countries not belonging to the European Economic Area (EEA).

Regarding the second measure, concerning the acceptability of non-regulated markets, the ECB published on 10 May 2004 a provisional list of non-regulated markets that have been accepted (cf. the press release entitled "Revision of the Eurosystem's collateral framework: first step towards the adoption of a single list"). A definitive list will be published on 30 May 2005. This list will then be reviewed at least once a year, in accordance with the following principles:

• assets listed, quoted, or traded on an accepted non-regulated market will be immediately eligible;
• assets listed, quoted, or traded only on non-regulated markets currently accepted, but which will cease to be so with effect from 30 May 2005, will continue to be eligible until May 2007. Beyond that, assets traded only on markets remaining unacceptable will become ineligible.

Furthermore, clarifications have been provided regarding the obligations incumbent on account holders in the event of withholding tax, and in particular within the framework of the US withholding tax regime applicable to eligible US securities. The modalities for communication of the General Conditions and the modifications thereto by the BCL and those applicable to the lists of authorized signatures of account holders have been modified and specified. A new provision establishes the principle of recourse to pledge as a mode of mobilization of eligible assets, but reserves to the BCL the possibility of recourse to repurchase agreements when it deems necessary. Specific requirements applicable in the event of cross-border mobilization of bank loans from the Level 2 list of certain NCBs have been introduced. The fee table for operations has, for its part, been updated.

The modifications thus made concern mainly the following documents:

• the General Conditions themselves (1.17.; 1.18.; 1.21., third paragraph; 2.3., first, second and third paragraphs; 2.9., first paragraph, third line; 6.22.; 8.1., third paragraph; 8.4.; 8.11, second paragraph);

• Annex 2 (ECB/2001/13 corrected by ECB/2002/4 and ECB/2002/8; amended by ECB/2003/10);

• Annex 3 ("General Documentation on the Eurosystem's monetary policy instruments and procedures" of February 2005);

• Annex 8 (2.1., fourth paragraph; 4.1., first paragraph – box included, fourth *, from the sixth line, eighth and ninth * and the following paragraph, tenth and eleventh * and the four paragraphs that follow; 4.4.3; 5.2.9.1., second line of the table; 5.2.9.2., from the third to the last line of the table; 5.2.9.3., deletion of this paragraph; 5.3.6.1., from the second to the fifth line of the table; 5.3.6.2., deletion of this paragraph; 5.5.6.1., from the second to the fourth line of the table; 5.5.6.2., deletion of this paragraph; 5.6.6., deletion of this paragraph);

• Annex 12 (points 2 and 7);

• Annex 13 (update of the BCL Swift user guide): integration of the factor pool into MT544, MT535 and MT564, update of the BIC codes to be entered in field 95 : P (« Place of Settlement »), adaptation of SWIFT messages to SR2005 (MT535 and MT564) and update of MT564 and creation of MT565 to facilitate the exchange of information relating to the beneficial owner for US securities subject to withholding tax.

The updated version of the BCL's General Conditions for operations is available from 18 May 2005 on the BCL website: www.bcl.lu. A printed version of the BCL's General Conditions is available upon request.

The document "The implementation of monetary policy in the euro area: General Documentation on the Eurosystem's monetary policy instruments and procedures" of February 2005 constitutes the new Annex 3 to the BCL's General Conditions. Additional copies of this document can be obtained from the BCL (General Secretariat, tel.: 4774-4265).

The revised framework resulting from ECB/2005/2 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 General Conditions of the BCL, as modified, enter into force on 30 May 2005.

Please accept, Ladies and Gentlemen, the assurance of our most distinguished sentiments.

BANQUE CENTRALE DU LUXEMBOURG
The Management

Serge KOLB Andrée BILLON Yves MERSCH