The European Central Bank (ECB) announced today through a statement on its website that starting from November next year, it will change the methodology for calculating the valuation margins (‘haircuts’) on collateral assets.
The update aims to “maintain an adequate level of risk protection,” according to the ECB.
Additionally, the ECB seeks to “improve the risk equivalence of assets” by ensuring the availability of collateral assets.
This marks the first revision of this kind by the ECB since the one announced in 2022, which was implemented in June of the following year.
The revision affects own-use bonds, retained asset securitization bonds, and individual loans.
As a result, banks will need to provide more information than what the ECB currently requires.
The goal is for these assessments to reflect the actual risks as accurately as possible.
