8/3/2019 ECB 2010 Annual Report Assets Pledged Composition
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98ECBAnnual Report2010
with the Eurosystem as they did in response to
the
nancial market turbulence (see Chart 47).The share of deposited
collateral not used tocover credit from monetary policy
operationstherefore increased to signi cantly higher levelsthan in
the years before. This suggests that ashortage of collateral has
not been a systemicconstraint on the Eurosystems counterparties
atthe aggregate level.
As regards the composition of collateral putforward (see Chart
48), the average share of asset-backed securities slightly
increased from23% in 2009 to 24% in 2010, thereby becomingthe
largest class of asset put forward as collateralwith the
Eurosystem, while the overall amountsubmitted remained stable.
Uncovered bank
bonds further decreased to 21% of the collateral put forward in
2010. Non-marketable assetsgained further importance, with their
share risingfrom 14% in 2009 to 18% in 2010. In addition,also owing
to the sovereign debt crisis in someeuro area countries, the
average share of centralgovernment bonds further increased from
11%
in 2009 to 13% in 2010. The asset classes whichwere temporarily
eligible until the end of 2010accounted for around 1% of the total
marketablecollateral put forward at the end of 2010.
RISK MANAGEMENT ISSUESThe Eurosystem mitigates the risk of
acounterparty default in a Eurosystem creditoperation by requiring
counterparties to submitadequate collateral. However, the
Eurosystem isstill exposed to a number of nancial risks if
acounterparty defaults, including credit, market
and liquidity risk. In addition, the Eurosystemis exposed to
currency risk in the contextof liquidity-providing operations in
foreigncurrencies against euro-denominated collateral,whenever
these are conducted. In order toreduce all these risks to
acceptable levels, theEurosystem maintains high credit standards
for assets accepted as collateral, valuates collateralon a daily
basis and applies appropriaterisk control measures. The
establishment of the new Risk Management Committee hasfurther
contributed to the enhancement of theEurosystems risk management
framework (see also Sections 1.5 and 1.6 of Chapter 10).
As a matter of prudence, the Eurosystem hasestablished a buffer
against potential shortfallsresulting from the eventual resolution
of collateral received from defaulted counterparties.The level of
the buffer is reviewed annually,
pending the eventual disposal of the collateraland in line with
the prospect of recovery. Moregenerally, nancial risks in credit
operations arequanti ed and regularly reported to the
ECBsdecision-making bodies.
In 2010 the ECB made a number of adjustmentsto its eligibility
criteria and risk controlframework. The Governing Council decidedto
keep the minimum credit threshold for marketable and non-marketable
assets in theEurosystem collateral framework at investment-grade
level (i.e. BBB-/Baa3) beyond the endof 2010, except in the case of
asset-backedsecurities. As a consequence of this decision, theECB
announced on 8 April 2010 and publishedon 28 July 2010 a new
schedule which duly
Chart 48 Breakdown of assets (including creditclaims) put
forward as collateral by asset type
(percentages; annual averages)
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
2005 2006 2007 2008 2009 2010
central government securitiesregional government
securitiesuncovered bank bondscovered bank bondscorporate
bondsasset-backed securitiesother marketable assetsnon-marketable
assets
Source: ECB.
