Collateral management

General information

In conducting its refinancing operations, the Eurosystem requires, pursuant to Article 18.1 of the Statute of the European System of Central Banks (ESCB), that counterparties pledge adequate collateral to guarantee the debt incurred.

In order to allow the widespread participation of counterparties in refinancing operations, the Eurosystem admits a broad range of eligible collateral assets, comprising securities and credit claims. In response to the financial and economic crises that have played out over the years, the ECB and the Bank of Italy have adopted extraordinary and temporary measures designed to ensure that counterparties have collateral available. To this end, eligibility and risk control requirements have been eased by means of specific measures (see, for instance 'The measures to expand the range of eligible collateral assets undertaken by the Eurosystem to safeguard monetary policy operations in response to the Covid-19 emergency', only in Italian).

The role of the Bank of Italy

The Bank of Italy manages the collateral which banks operating in Italy pledge against the financing they obtain.

In this capacity, with reference to securities listed in Italy, the Bank of Italy collects and processes information on individual issues to ensure that the database of eligible assets is kept up to date (Eligible assets database).

There is no requirement, instead, to include bank loans in a publicly available list. Each counterparty individually selects from among the loans on its balance sheet those that meet the eligibility criteria set out in the Eurosystem common set of rules or the national frameworks for additional credit claims.

Several sources are available for counterparties to assess the credit quality of eligible bank loans, including the In-house Credit Assessment System, developed and managed by the Bank of Italy (ICAS-BI).

Each counterparty deposits the assets eligible as collateral for monetary policy financing into an account held with the Bank of Italy; these assets are pledged in proportion to the financing obtained. Taken together, the deposited assets guarantee the overall financing provided (see the section 'Collateral pool management'). For each counterparty, the Bank of Italy verifies on a daily basis that the value of the collateral is adequate to cover the full amount of outstanding lending. The value of each asset pledged is then reduced by haircuts calculated, for each credit quality step, on the basis of the liquidity risk of the assets.