The European Central Bank published President Christine Lagarde’s reply to Members of the European Parliament on the state of play of the Eurosystem collateral framework for refinancing operations, setting out how eligibility and credit quality are assessed and reiterating the Eurosystem’s discretion in applying external ratings. The letter notes that the framework has continued to evolve, including the Governing Council’s decision to accept Scope Ratings as an external credit assessment institution for the Eurosystem credit assessment framework (ECAF). It also confirms that euro area public sector assets will continue to be assessed for collateral eligibility using the first-best available rating from an accepted external credit assessment institution, alongside a recent change under which private sector assets will be assessed on the basis of the second-best rating. While the framework includes a minimum credit quality standard for all eligible assets, including sovereign bonds, the Eurosystem does not rely mechanically on agency ratings, performs due diligence on ratings, and has previously deviated from external ratings by temporarily suspending the minimum rating threshold when warranted to support monetary policy transmission, while acting within its monetary policy framework and price stability mandate.
European Central Bank 2025-02-25
European Central Bank updates MEPs on the Eurosystem collateral framework and confirms first-best rating use for euro area public sector assets
The European Central Bank (ECB) released President Christine Lagarde’s response to the European Parliament on the Eurosystem collateral framework, detailing eligibility and credit quality assessments. The ECB confirmed accepting Scope Ratings as an external credit assessment institution and outlined changes in rating assessments for public and private sector assets. The ECB emphasized its discretion in applying ratings, including deviations from external ratings to support monetary policy transmission.