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European Central Bank and Banco de España measures against the effects of COVID-19 on the monetary policy collateral framework, and their impact on Spanish counterparties

Author

Listed:
  • Jorge Escolar

    (Banco de España)

  • José Ramón Yribarren

Abstract

In March and April 2020, the European Central Bank adopted a series of monetary policy measures aimed at providing liquidity support to the financial system and facilitating access to financing for the real economy to mitigate the adverse economic effects of COVID-19. Some of these measures focused on preserving and expanding the universe of assets that counterparties can use as collateral to participate in Eurosystem financing operations. This paper, after a brief summary of the collateral framework for monetary policy operations, studies the measures adopted in this connection by the European Central Bank and the Banco de España and their impact on Spanish counterparties. This study finds that, in overall terms, two measures stand out over the others in terms of the amount of collateral provided: the acceptance of partially government-guaranteed credit claims and the reduction in haircuts. Although all counterparties have been affected by the measures, the extent of the impact has differed widely, determined by the characteristics of the assets used as collateral and their management. Finally, the interaction between the different measures is analysed, since more than one can affect the eligibility and valuation of the same asset.

Suggested Citation

  • Jorge Escolar & José Ramón Yribarren, 2021. "European Central Bank and Banco de España measures against the effects of COVID-19 on the monetary policy collateral framework, and their impact on Spanish counterparties," Occasional Papers 2128, Banco de España.
  • Handle: RePEc:bde:opaper:2128e
    as

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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosOcasionales/21/Files/do2128e.pdf
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    References listed on IDEAS

    as
    1. Sergio Gavilá & Alfredo Maldonado & Antonio Marcelo, 2020. "The Banco de España in-house credit assessment system," Financial Stability Review, Banco de España, issue Spring.
    2. Sergio Gavilá & Alfredo Maldonado & Antonio Marcelo, 2020. "The Banco de España in-house credit assessment system," Financial Stability Review, Banco de España, issue Spring.
    3. Rostagno, Massimo & Altavilla, Carlo & Carboni, Giacomo & Lemke, Wolfgang & Motto, Roberto & Saint Guilhem, Arthur & Yiangou, Jonathan, 2019. "A tale of two decades: the ECB’s monetary policy at 20," Working Paper Series 2346, European Central Bank.
    4. Sergio Gavilá & Alfredo Maldonado & Antonio Marcelo, 2020. "The Banco de España in-house credit assessment system," Revista de Estabilidad Financiera, Banco de España, issue Spring.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    European Central Bank; Eurosystem; collateral; monetary policy; counterparties.;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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