Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278422 
Year of Publication: 
2023
Series/Report no.: 
ECB Occasional Paper No. 312
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
In implementing its monetary policy, the ECB conducts collateralised credit operations with banks. The bulk of the financial risks involved in these collateralised credit operations are mitigated primarily by the valuation haircuts imposed on the mobilised collateral. Since the establishment of the euro in January 1999, valuation haircuts have been formulated mainly on the basis of risk management considerations and have been systematically calibrated with a very low level of risk tolerance. However, their implied risk tolerance may sometimes be used as a monetary policy stance lever, as clearly illustrated when the ECB decided to reduce haircuts to improve funding conditions for the real economy during the outset of the coronavirus (COVID-19) pandemic. In addition, the ECB ensures that financial market developments warranting general methodological changes are incorporated into the calibration of valuation haircuts adequately and in good time. In a particularly challenging economic environment, the ECB has also recently committed to ensuring that climate change risks are considered when calibrating the valuation haircuts applied to corporate bonds. Against this background, the purpose of this paper is to provide an overview and explanation of the main guiding rules, as well as explaining some of the statistical methods currently employed by the ECB when formulating valuation haircuts. Keywords: monetary policy implementation, risk control framework of credit operations, valuation haircuts.
Subjects: 
monetary policy implementation
risk control framework of creditoperations
valuation haircuts
JEL: 
D02
E58
G32
Q54
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6056-4
Document Type: 
Research Report

Files in This Item:
File
Size
783.76 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.