Decision No. 2020-03 of 18 May 2020 amending Decision No. 2020-02 of 20 April 2020 on additional temporary measures concerning Banque de France refinancing operations and collateral eligibility

Decision No. 2020-03 of 18 May 2020 amending Decision No. 2020-02 of 20 April 2020 regarding additional temporary measures concerning the refinancing operations of the Banque de France and the eligibility of collateral

THE GOVERNOR OF THE BANQUE DE FRANCE

Having regard to:

• the Treaty on the Functioning of the European Union, and in particular Article 127(1) and Article 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) 2014/528 of 9 July 2014 on additional temporary measures concerning the refinancing operations of the Eurosystem and the eligibility of collateral and amending Guideline ECB/2007/9 (ECB/2014/31), as amended,

• 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) 2020/515 of 7 April 2020 amending Guideline ECB/2014/31 on additional temporary measures concerning the refinancing operations of the Eurosystem and the eligibility of collateral (ECB/2020/21),

• ECB Guideline (EU) 2020/634 of 7 May 2020 amending Guideline ECB/2014/31 on additional temporary measures concerning the refinancing operations of the Eurosystem and the eligibility of collateral (ECB/2020/29),

• 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 Decision of the Governor of the Banque de France No. 2015-01 of 22 April 2015 on the implementation of the monetary policy and intraday credit of the Banque de France, as amended,

• the Decision of the Governor of the Banque de France No. 2020-02 of 20 April 2020 on additional temporary measures concerning the refinancing operations of the Banque de France and the eligibility of collateral,

HEREBY DECIDES

Article 1

The Decision of the Governor of the Banque de France No. 2020-02 of 20 April 2020 on additional temporary measures concerning the refinancing operations of the Banque de France and the eligibility of collateral (hereinafter "the Decision") is amended as follows:

1. Article 8 bis is added, worded as follows:

"Article 8 bis
Acceptance of negotiable instruments issued by the central administration of the Hellenic Republic

1. Negotiable instruments issued by the central administration of the Hellenic Republic that do not meet the credit quality requirements applicable to negotiable assets, set out in Articles 59 and 71 as well as Articles 82 to 88 of Decision No. 2015-01, shall constitute eligible collateral for the monetary policy operations of the Eurosystem provided that these instruments meet all other eligibility criteria applicable to negotiable assets, defined in said Decision;

2. The instruments referred to in paragraph 1 shall be subject to the haircuts specified in Annex II ter to this Decision."

3. Article 8 ter is added, worded as follows:

"Article 8 ter
Admission of certain negotiable assets and certain issuers eligible as of 7 April 2020

1. [Not applicable].

2. Notwithstanding the provisions of Article 59(3), Article 71 and Article 82(1)(a) of Decision No. 2015-01, negotiable assets - other than asset-backed securities - issued on or before 7 April 2020, which on 7 April 2020 had been assigned a public rating provided by at least one accepted ECAI and meeting the Eurosystem's minimum credit quality requirements, shall constitute eligible collateral for the Eurosystem's credit operations if at any time after 7 April 2020:

a) these negotiable assets are subject to a public rating, provided by at least one accepted ECAI, which corresponds to at least credit quality step 5 in the Eurosystem's harmonised rating scale; and

b) these assets continue to meet all other eligibility criteria applicable to negotiable assets under Decision No. 2015-01.

For the avoidance of doubt, the public rating as of 7 April 2020 referred to in this paragraph is established by the Eurosystem in accordance with the rules provided for in Article 82(1)(a), Article 82(2), Article 83, Article 84(a) and (b), Article 85 and Article 86 of Decision No. 2015-01.

3. Where the compliance of a negotiable asset with the Eurosystem's minimum credit quality requirements as of 7 April 2020 is determined on the basis of a rating by an ECAI concerning the issuer or a rating by an ECAI concerning the guarantor assigned by an accepted ECAI system, this negotiable asset shall constitute eligible collateral for the Eurosystem's credit operations if at any time after 7 April 2020:

a) the rating by an ECAI concerning the issuer or the rating by an ECAI concerning the guarantor, as the case may be, for this negotiable asset, corresponds to at least credit quality step 5 in the Eurosystem's harmonised rating scale; and

b) this negotiable asset continues to meet all other eligibility criteria applicable to it under Decision No. 2015-01.

4. Negotiable assets - other than asset-backed securities - issued after 7 April 2020 whose issuer or guarantor, as the case may be, had on 7 April 2020 a public rating provided by at least one accepted ECAI system meeting the Eurosystem's minimum credit quality requirements, shall constitute eligible collateral for the Eurosystem's credit operations if at any time after 7 April 2020:

a) these negotiable assets are subject to a public rating, provided by at least one accepted ECAI, which corresponds to at least credit quality step 5 in the Eurosystem's harmonised rating scale; and

b) these negotiable assets meet all other eligibility criteria applicable to negotiable assets under Decision No. 2015-01.

For the avoidance of doubt, the public rating referred to in point a) of this paragraph is assigned by the Eurosystem in accordance with the rules provided for in Article 82(1)(a), Article 82(2), Article 83, Article 84(a) and (b), Article 85 and Article 86 of Decision No. 2015-01.

5. Covered bonds issued after 7 April 2020 under a covered bond programme which itself had been subject, as of 7 April 2020, to a credit assessment carried out by at least one accepted ECAI system and meeting the Eurosystem's minimum credit quality requirements, shall constitute eligible collateral for the Eurosystem's credit operations if:

a) at any time after 7 April 2020, this covered bond programme is subject to a public rating provided by at least one accepted ECAI system, corresponding to at least credit quality step 5 in the Eurosystem's harmonised rating scale; and

b) these covered bonds meet all other eligibility criteria applicable to them under Decision No. 2015-01.

6. The negotiable assets referred to in Article 87(2) of Decision No. 2015-01 which, as of 7 April 2020, did not have a public rating provided by an accepted ECAI system, but which on 7 April 2020 benefited from an implicit credit assessment carried out by the Eurosystem, in accordance with the rules set out in Article 87(1) and (2) of Decision No. 2015-01, meeting the Eurosystem's credit quality requirements, shall constitute eligible collateral for the Eurosystem's credit operations regardless of their date of issuance, if at any time after 7 April 2020:

a) the issuer or the guarantor, as the case may be, of these negotiable assets corresponds to at least a credit quality requirement equivalent to credit quality step 5 in the Eurosystem's harmonised rating scale; and

b) these negotiable assets meet all other eligibility criteria applicable to them under Decision No. 2015-01.

7. Notwithstanding the provisions of Article 59(3), Article 71 and Article 82(1)(b) of Decision No. 2015-01, asset-backed securities issued on or before 7 April 2020, which on 7 April 2020 had been subject to at least two public ratings provided by two different accepted ECAI systems, and meeting the Eurosystem's minimum credit quality requirements under Decision No. 2015-01, shall constitute eligible collateral for the Eurosystem's credit operations if at any time after 7 April 2020:

a) these asset-backed securities are subject to at least two public ratings, each provided by a different accepted ECAI system, and corresponding to at least credit quality step 4 in the Eurosystem's harmonised rating scale; and

b) these asset-backed securities continue to meet all other eligibility criteria applicable to asset-backed securities under Decision No. 2015-01.

For the avoidance of doubt, the requirements provided for in Article 3(1)(a) to (d) and Article 3(4) of this Decision do not apply to the asset-backed securities referred to in this paragraph.

8. Asset-backed securities that were accepted by the Eurosystem as eligible collateral on 7 April 2020 under Article 3(1) of this Decision, shall remain eligible if at any time after 7 April 2020:

a) they are subject to two public ratings, provided by two accepted ECAI systems, which correspond to at least credit quality step 4 in the Eurosystem's harmonised rating scale; and

b) they continue to meet all other requirements applicable to them under Article 3(1) (except the rating level), Article 3(2) bis and Article 3(4) of this Decision.

For the avoidance of doubt, Article 3(2) and Article 3(5) of this Decision do not apply to the asset-backed securities referred to in this paragraph.

9. As long as they continue to be accepted as eligible collateral by the Eurosystem under this Article, the negotiable assets, including covered bonds, referred to in paragraphs 2 to 6, shall be subject to the haircuts specified in Annex II ter to this Decision. The asset-backed securities referred to in paragraphs 7 and 8 shall be subject to the haircuts specified in Annex II bis to this Decision. The haircuts are calculated on the basis of the current rating applicable at any time after 7 April 2020 in accordance with the rules regarding the priority given to credit assessments carried out by an ECAI provided for in Articles 83 to 88 of Decision No. 2015-01.

10. In addition to the haircuts defined in paragraph 9, the following additional haircuts apply:

a) asset-backed securities, covered bonds and unsecured debt instruments issued by credit institutions whose value is calculated theoretically in accordance with the rules of Article 134 of Decision No. 2015-01 shall be subject to an additional haircut in the form of a 4% haircut valuation;

b) covered bonds used for own account shall be subject to an additional haircut i) of 6.4% applied to the value of debt instruments allocated to credit quality steps 1 and 2; and ii) of 9.6% applied to the value of debt instruments allocated to credit quality steps 3, 4 and 5;

c) for the purposes of point b), "used for own account" refers to the submission or use, by a counterparty, of covered bonds that are issued or guaranteed by the counterparty itself or by any other entity with which this counterparty has close links as determined in accordance with Article 138 of Decision No. 2015-01;

d) if the additional haircut referred to in point b) cannot be applied within the framework of a collateral management system of a NCB, a triparty agent or TARGET2-Securities for the self-constitution of collateral, the additional haircut shall be applied in these systems or on this platform to the total value of issued covered bonds that can be used for own account.

11. For the avoidance of doubt, the provisions of this Article are independent and are not taken into account in determining the eligibility of instruments purchased outright under the Public Sector Purchase Programme (PSPP) on secondary markets; the third Covered Bond Purchase Programme (CBPP3); the Asset-Backed Securities Purchase Programme (ABSPP); the Corporate Sector Purchase Programme (CSPP); and the Pandemic Emergency Purchase Programme (PEPP)."

12. Annex II bis is replaced by the following text:

"Annex II bis
HAIRCUT TABLE APPLICABLE TO ELIGIBLE ASSET-BACKED SECURITIES UNDER ARTICLE 3(2) AND ARTICLE 8 TER OF THIS DECISION

Credit Quality
Weighted Average Life (*)
Haircut

Step 3
[0-1) 4.8
[1-3) 7.2
[3-5) 10.4
[5-7) 12.0
[7-10) 14.4
[10- ∞) 24.0

Step 4
[0-1) 11.2
[1-3) 15.2
[3-5) 18
[5-7) 24.8
[7-10) 30.4
[10- ∞) 43.2

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

4. Annex II ter is added, worded as follows:

"Annex II ter
HAIRCUT TABLE APPLICABLE TO NEGOTIABLE ASSETS, OTHER THAN ASSET-BACKED SECURITIES, REFERRED TO IN ARTICLES 8 BIS AND 8 TER

Category I
Category II
Category III
Category IV

Credit Quality
Residual Maturity in years (*)
Fixed and
Variable Coupon
Zero Coupon
Fixed and
Variable Coupon
Zero Coupon
Fixed and
Variable Coupon
Zero Coupon
Fixed and
Variable Coupon
Zero Coupon

Step 4
[0-1) 6.4 6.4 8 8 12.8 12.8 20 20
[1-3) 9.6 10.4 12 15.2 16 18.4 28 30
[3-5) 11.2 12 16 20 19.2 23.6 33.6 37.2
[5-7) 12.4 13.6 20 24.8 22.4 28.4 36.8 40.4
[7-10) 13.2 14.4 21.6 28.4 24.8 32 40 44.8
[10- ∞) 14.4 16.8 23.2 31.6 26.4 34.8 41.6 46.8

Step 5
[0-1) 8 8 12 12 22.4 22.4 24 24
[1-3) 11.2 12 16 19.2 25.6 28 32 34
[3-5) 13.2 14 22.4 26.4 28.8 33.2 38.4 42
[5-7) 14.4 15.6 27.2 32 31.6 37.6 43.2 46.8
[7-10) 15.2 16.4 28.8 35.6 33.2 40.4 46.4 51.2 [10- ∞) 16.4 18.8 30.4 38.8 33.6 42 48 53.2

• 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."

Article 2
Publication and entry into force

1. This Decision shall be published in the Official Publication Register of the Banque de France.

2. It shall enter into force on 18 May 2020. The temporary measures contained in this Decision shall apply as long as ECB Guidelines 2020/21 and 2020/29 are in force.

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, 18 May 2020

François VILLEROY de GALHAU