BANQUE CENTRALE DU LUXEMBOURG

Regulation of the Central Bank of Luxembourg 2008/No. 1 of 28 November 2008

containing temporary modifications to the rules applicable to the eligibility of collateral

Domain: Implementation of monetary policy in the euro area

The Directorate of the Central Bank of Luxembourg,

Having regard to Article 108bis of the Constitution;

Having regard to Article 34(1) of the Law of 23 December 1998 relating to the Central Bank of Luxembourg, as amended by Article V(4) of the Law of 24 October 2008;

Having regard to the Treaty establishing the European Community, and in particular Article 105, paragraph 2, first indent;

Having regard to Article 2(2) of the amended Law of 23 December 1998 relating to the monetary status and to the Central Bank of Luxembourg;

Having regard to the Orientation of the European Central Bank of 21 November 2008 containing temporary modifications to the rules applicable to the eligibility of collateral (ECB/2008/18);

Considering that the Orientation of the European Central Bank of 21 November 2008 containing temporary modifications to the rules applicable to the eligibility of collateral (ECB/2008/18), which succeeds the Regulation of the European Central Bank of 23 October 2008 containing temporary modifications to the rules applicable to the eligibility of collateral (ECB/2008/11), as clarified by Decision ECB/2008/15 of 14 November 2008, must be implemented rapidly by the national central banks of the Eurosystem and that the implementation measures were communicated to the European Central Bank on 27 November 2008 for verification, in accordance with Article 9 of said Orientation.

Has adopted:

Art. 1. Expansion of certain eligibility criteria applicable to collateral

(1) The eligibility criteria applicable to collateral set out in Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg, which implement Annex I of Orientation ECB/2000/7 (the "general documentation"), are expanded in accordance with Articles 2 to 7 below.

(2) In the event of a discrepancy between this Regulation and the General Conditions of Operations of the Central Bank of Luxembourg, the former shall prevail. The Central Bank of Luxembourg continues to apply all provisions of the General Conditions of Operations of the Central Bank of Luxembourg without modification, except as otherwise provided in this Regulation.

Art. 2. Admission of collateral denominated in US dollars, British pounds, or Japanese yen as eligible collateral

(1) Negotiable debt instruments described in Section 4.1.1 of Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg, implementing Chapter 6.2.1 of the general documentation, if denominated in US dollars, British pounds, or Japanese yen, constitute eligible collateral for Eurosystem monetary policy operations, provided that: i) they are issued and held/settled in the euro area, and ii) the issuer is established in the European Economic Area.

(2) An additional haircut of 8% is imposed by the Eurosystem on all these negotiable debt instruments.

Art. 3. Admission of syndicated loans as eligible collateral

(1) Syndicated loans constitute eligible collateral for Eurosystem monetary policy operations only insofar as they comply with Sections 4.1.2.1 and 4.5.3.1, as well as 4.1.3 of Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg, implementing respectively Chapters 6.2.2 and 6.3.3, as well as Annex 7 of the general documentation.

(2) Without prejudice to paragraph 1, syndicated loans governed by the legislation of England and Wales that were accepted no later than 30 November 2008 for Eurosystem monetary policy operations in accordance with the requirements set out in Decision ECB/2008/15 of 14 November 2008 concerning the application of Regulation ECB/2008/11 of 23 October 2008 containing temporary modifications to the rules applicable to the eligibility of collateral, remain eligible as collateral for the duration of the Eurosystem monetary policy operation for which they were accepted as eligible collateral.

Art. 4. Admission of debt instruments issued by credit institutions and traded on certain non-regulated markets as eligible collateral

(1) Debt instruments issued by credit institutions and traded on certain non-regulated markets as specified by the European Central Bank constitute eligible collateral for Eurosystem monetary policy operations.

(2) An additional haircut of 5% is imposed by the Eurosystem on all these debt instruments.

Art. 5. Admission of collateral with a credit rating of BBB- or higher as eligible collateral

(1) The minimum requirement of the Central Bank of Luxembourg regarding the credit quality assessment of eligible assets admitted as collateral for Eurosystem monetary policy operations corresponds to a credit rating equivalent to "BBB-". This modification to the credit rating requirement applies to both negotiable and non-negotiable assets, with the exception of asset-backed securities described in Section 4.5 of Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg implementing Chapter 6.3 of the general documentation, for which the requirement for high credit quality remains unchanged.

(2) An additional haircut of 5% is imposed by the Eurosystem on all eligible assets with a credit rating below "A-".

Art. 6. Admission of subordinated assets with adequate guarantees as eligible collateral

(1) The requirement of non-subordination, relating to the eligibility of negotiable assets as collateral for Eurosystem monetary policy operations as described in Section 4.1.1 of Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg, implementing Chapter 6.2.1 of the general documentation, does not apply when a guarantor whose financial situation gives no cause for concern provides an unconditional and irrevocable demand guarantee covering these assets, as further defined in Section 4.5.2 of Annex 8 "Manual of Procedures for Operations" of the General Conditions of Operations of the Central Bank of Luxembourg implementing Chapter 6.3.2 of the general documentation.

(2) An additional haircut of 10% is imposed by the Eurosystem on these assets, to which is added a 5% reduction in valuation in the case of theoretical valuation.

Art. 7. Admission of term deposits as eligible collateral

Term deposits described in Section 6.6. of the General Conditions of Operations of the Central Bank of Luxembourg, which implements Chapter 3.5 of the general documentation, and made by eligible counterparties are eligible as collateral for all Eurosystem refinancing operations.

Art. 8. Entry into force

This Regulation shall enter into force on the day of its publication and shall cease to be in force on 1 January 2010.

Art. 9. Publication arrangements

This Regulation shall be published in the Mémorial and on the Internet site of the Central Bank of Luxembourg.

BANQUE CENTRALE DU LUXEMBOURG
The Directorate

Serge Kolb Andrée Billon Yves Mersch
General Director