The European Central Bank on Tuesday tightened the limit on the amount of government guaranteed debt that banks can use as collateral in return for loans.
In a legal decision document, the central bank said "counterparties that issue eligible bank bonds guaranteed by an EEA public sector entity with the right to impose taxes may not submit such bonds or similar bonds issued by closely linked entities as collateral for Eurosystem credit operations in excess of the nominal value of these bonds already submitted as collateral on the day this Decision enters into force."
The bank also said that in exceptional cases, the Governing Council of the central bank may decide on derogations from the new requirement and a request for a derogation should be accompanied by a funding plan.
by RTT Staff Writer
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