11 OCT 2010
Harry Banks | City AM
THE European Central Bank (ECB) has made changes to its legal framework which underscore its power to limit individual banks’ borrowing at lending operations, amid ongoing discussion about how to tackle the dependency of some institutions on its funding.
The changes, published over the weekend, clarify its ability to bar or restrict banks from borrowing from the ECB and impose ad-hoc limits on what assets can be swapped for loans.
“On the grounds of prudence, the Eurosystem may also reject assets, limit the use of assets or apply supplementary haircuts to assets submitted as collateral in Eurosystem credit operations by specific counterparties,” the new legal text said.
The changes came into force yesterday and although there was already a provision to restrict banks’ borrowings, the new rules spell out the ECB’s powers more clearly.
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