ECB introduces changes to credit facility for euro-area CCPs
01 May 2025 EU
Image: nmann77/stock.adobe.com
The Governing Council of the European Central Bank (ECB) has decided to implement changes to the dedicated Eurosystem overnight credit facility.
The facility serves as a crisis-related liquidity backstop for eligible euro area central counterparties (CCPs) under the TARGET Guideline.
Activation of the CCP credit facility will no longer require a decision by the Governing Council, meaning that the facility will be immediately available to eligible euro-area CCPs if needed.
A spokesperson for the ECB says: 鈥淐CPs are systemically important financial market infrastructures. Under normal operating conditions, their liquidity inflows and outflows are balanced by the end of the day, meaning that they do not generally encounter liquidity mismatches.
鈥淚n situations of severe financial stress, however, it may not be feasible for a CCP to manage its potentially sizeable liquidity needs through market-based solutions in a timely manner. In these circumstances, the CCP credit facility can provide a pre-arranged and effective liquidity backstop.鈥�
The revised CCP credit facility remains subject to the TARGET Guideline, which sets out relevant requirements for CCPs to access the facility, and is outside the monetary policy implementation framework.
As part of these requirements, new safeguards are being introduced to ensure that only euro-area CCPs that are financially sound and have sound liquidity risk management may access the CCP credit facility.
In case of non-compliance with these safeguards, the Governing Council may decide on discretionary measures on the grounds of prudence.
The interest rate applicable to borrowings under the CCP credit facility will be the ECB marginal lending facility rate.
The maturity of the facility will be overnight, with the possibility of rolling over across business days.
Collateralisation requirements will continue to apply in line with the current provisions of the TARGET Guideline.
The decision of the Governing Council concludes a review of the CCP credit facility by the Eurosystem central banks conducted over the past years.
The changes to the CCP credit facility will come into effect through an amendment to the TARGET Guideline and the adoption of further legal acts dedicated to the mentioned safeguards, the assessments underpinning those safeguards, and related discretionary measures of the Eurosystem on the grounds of prudence.
The application date of all related legal acts is foreseen for the fourth quarter of 2025, and once formally adopted, the relevant legal acts will be published.
The facility serves as a crisis-related liquidity backstop for eligible euro area central counterparties (CCPs) under the TARGET Guideline.
Activation of the CCP credit facility will no longer require a decision by the Governing Council, meaning that the facility will be immediately available to eligible euro-area CCPs if needed.
A spokesperson for the ECB says: 鈥淐CPs are systemically important financial market infrastructures. Under normal operating conditions, their liquidity inflows and outflows are balanced by the end of the day, meaning that they do not generally encounter liquidity mismatches.
鈥淚n situations of severe financial stress, however, it may not be feasible for a CCP to manage its potentially sizeable liquidity needs through market-based solutions in a timely manner. In these circumstances, the CCP credit facility can provide a pre-arranged and effective liquidity backstop.鈥�
The revised CCP credit facility remains subject to the TARGET Guideline, which sets out relevant requirements for CCPs to access the facility, and is outside the monetary policy implementation framework.
As part of these requirements, new safeguards are being introduced to ensure that only euro-area CCPs that are financially sound and have sound liquidity risk management may access the CCP credit facility.
In case of non-compliance with these safeguards, the Governing Council may decide on discretionary measures on the grounds of prudence.
The interest rate applicable to borrowings under the CCP credit facility will be the ECB marginal lending facility rate.
The maturity of the facility will be overnight, with the possibility of rolling over across business days.
Collateralisation requirements will continue to apply in line with the current provisions of the TARGET Guideline.
The decision of the Governing Council concludes a review of the CCP credit facility by the Eurosystem central banks conducted over the past years.
The changes to the CCP credit facility will come into effect through an amendment to the TARGET Guideline and the adoption of further legal acts dedicated to the mentioned safeguards, the assessments underpinning those safeguards, and related discretionary measures of the Eurosystem on the grounds of prudence.
The application date of all related legal acts is foreseen for the fourth quarter of 2025, and once formally adopted, the relevant legal acts will be published.
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