ECB no longer accepts syndicated loans as collateral
The European Central Bank (ECB) has removed syndicated loans governed by English law from its list of collateral eligible for its credit operations only four days after they were originally accepted.
On October 15, the ECB widened the framework of eligible collateral in an effort to facilitate access to its credit lines and boost liquidity among European banks. The Bank of England specifically excluded syndicated-loans in the range of collateral it would accept on its own credit schemes earlier last month.
Euro-dominated syndicated loans and various debt instruments would qualify under the new guidelines, while the ECB also enhanced its longer-term refinancing operations to help banks in an increasingly hostile credit environment.
However, the ECB ceased to accept syndicated loans as collateral for its credit lines on November 21, having only started to admit them on November 17. The collateral was originally intended to be eligible until the end of 2009.
The move has puzzled bankers and ratings agencies alike, particularly as the ECB is refusing to comment on why it no longer accepts the loans. One ratings agency analyst speculated the ECB may be concerned that a credit event on the loans would be out of their jurisdiction, which could cause them unnecessary problems.
"It's most mysterious," said one head of global credit strategy at a multinational bank. "You would have thought that somebody was, in their minds, abusing the system, and so they put a stop to it."
"But it could be something perfectly innocent like the ECB realised it would be difficult to price this stuff as syndicated loans never trade," he added.
An ECB official said that the bank believes it currently accepts a sufficient range of collateral to allow banks access to its liquidity schemes, begging the question why it decided to accept syndicated loans in the first place.
See also: Demand wanes for central bank liquidity schemes
Central banks promise unlimited dollar lending
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Review of 2025: It’s the end of the world, and it feels fine
Markets proved resilient as Trump redefined US policies – but questions are piling up about 2026 and beyond
Hong Kong derivatives regime could drive more offshore booking
Industry warns new capital requirements for securities firms are higher than other jurisdictions
Will Iosco’s guidance solve pre-hedging puzzle?
Buy-siders doubt consent requirement will remove long-standing concerns
Responsible AI is about payoffs as much as principles
How one firm cut loan processing times and improved fraud detection without compromising on governance
Could one-off loan losses at US regional banks become systemic?
Investors bet Zions, Western Alliance are isolated problems, but credit risk managers are nervous
SEC poised to approve expansion of CME-FICC cross-margining
Agency’s new division heads moving swiftly on applications related to US Treasury clearing
ECB bank supervisors want top-down stress test that bites
Proposal would simplify capital structure with something similar to US stress capital buffer
Clearing houses warn Esma margin rules will stifle innovation
Changes in model confidence levels could still trip supervisory threshold even after relaxation in final RTS