Collateral management

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When it conducts refinancing operations the Eurosystem remains exposed for their duration to counterparty default risk. This is why financing is only granted against adequate collateral (Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank). To this end, the rules on Eurosystem collateral are designed to ensure that there is a broad range of eligible assets within the banking system to enable counterparties to take part in the refinancing operations.

The Bank of Italy is responsible for managing the collateral that Italian banks are required to provide against financing obtained from the Eurosystem. To this end, it identifies the financial assets that can be pledged as collateral on the basis of a set of criteria established by the Eurosystem. These can consist in marketable assets (securities), including those denominated in currencies other than the euro, or non-marketable assets (loans). More specifically, as for securities listed in Italy, the Bank of Italy collects and processes information on individual issues quoted on the national markets, thus ensuring that the Eligible Asset Data Base is kept up to date.

Each counterparty deposits the assets eligible as collateral to obtain monetary policy financing in an account held with the Bank of Italy, pledged in proportion to the financing disbursed (see the section on the Pooling of guarantees). The Bank of Italy verifies on a daily basis that the risk-adjusted market value of the collateral is sufficient to cover the amount of refinancing provided to each counterparty. It has also developed its own system to assess the risk of loans pledged as collateral in Eurosystem monetary policy operations (In-house Credit Assessment System - ICAS).

Further details from the ECB website