All credit operations of the ECB and the national central banks are performed "on the basis of adequate collateral". Consequently, each counterparty guarantees the credit received from a Eurosystem central bank by providing securities as collateral. These securities have to fulfill specific eligibility criteria defined by the Eurosystem.
You can download the daily updated eligible assets list or check the eligibility of one asset on the ECB website.
In order to face the risk of failure of a counterparty, Eurosystem applies a risk control framework that includes the following main elements:
- Haircuts : Eurosystem applies specific valuation haircuts to eligible assets. As a consequence haircuts are applied by deducting a certain percentage from the market value of the underlying asset. The haircuts differ according to the residual maturity, its coupon structure and liquidity category of the debt instruments,
- Margin calls : if after valuation, the underlying assets do not match the requirements as calculated on that day, symmetric margin calls are performed, then counterparties have to supply additional assets or cash.
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