ECB updates risk control framework for collateralized credit operations

The European Central Bank (ECB) has completed a review of its risk control framework for collateralized credit operations to ensure it remains protective, consistent, and risk-equivalent across asset classes.

The previous review was conducted in 2022, with implementation in June 2023. The current review introduces targeted improvements to the haircut methodology for marketable and non-marketable assets, focusing on own-used covered bonds, retained asset-backed securities (ABS), and individual credit claims.

As part of the review, the Governing Council has decided on several measures, including:

• Updating the haircuts for non-own-used marketable assets in categories I to V, aligning them with updated risk estimates across maturities and credit quality steps (CQS).
• Applying dedicated haircuts to retained ABS under an improved definition, where an ABS is classified as retained if the mobilising counterparty and the originator are the same or closely linked.
• Refining haircuts for own-used covered bonds, replacing the current add-on approach with a separate haircut schedule.
• Updating haircuts for individual credit claims and increasing their granularity by considering amortisation type, residual maturity, CQS, and interest-rate type. Counterparties will need to specify the amortisation type for each credit claim.

The ECB’s legal framework will be amended accordingly, with the new haircut schedule planned to enter into force in November 2026 at the earliest. This allows time for technical implementation and preparations by counterparties. Amendments will be published on the ECB’s website and in the Official Journal of the European Union in all official EU languages.

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