The European Central Bank amended the Eurosystem monetary policy framework to adopt more conservative credit rating aggregation, change the treatment of restricted funds and broaden collateral eligibility for certain corporate financial subsidiaries. National central banks must apply the changes from Nov. 30, 2026. For private sector assets and non-euro area public sector assets, the Eurosystem will generally use the second-best available external credit rating and apply a one-notch downgrade where only one rating is available. The first-best rule remains for assets issued or guaranteed by specified euro area public sector entities. The revised approach covers marketable assets and relevant credit claims, and may make an asset ineligible where the applicable second-best or downgraded rating falls below the Eurosystem threshold. Financial subsidiaries of predominantly non-financial corporate groups, excluding credit institutions and investment firms, may also qualify as debtors or guarantors of eligible credit claims. Direct fiduciary funds and other restricted funds will be excluded from excess reserves and marginal lending calculations, remunerated as non-monetary policy deposits and barred from the deposit facility where they are direct fiduciary funds. Counterparties must notify their national central bank of such funds, with noncompliance subject to recovery of undue benefits and a penalty rate of 2.5 percentage points above the average marginal lending rate, rising by a further 2.5 percentage points for repeated failures within 12 months. The amendments also clarify when access to monetary policy operations may be limited, suspended or excluded, including fixed timeframes for unresolved own-funds breaches and automatic access limits for counterparties deemed failing or likely to fail.

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