The European Central Bank continues to have problems with its
collateral management, according to a German newspaper report
Sunday.
The Bank of France, a member of the European System of Central
Banks, has granted too much credit compared with collateral to six
banks due to insufficient risk valuation discounts, or haircuts,
made on the collateral, reports German newspaper Welt am Sonntag.
The Bank provided credit in exchange for bonds known as Short-Term
European Paper, or STEP, which it accepted as collateral from the
banks, the newspaper says.
According to the report, notes worth less than 6.5 billion euros
($8.5 billion) with maturities of up to one year that were issued
by the six banks benefited from risk valuation discounts that were
too small. As a result, the banks were able to get up to EUR550
million in additional central bank money without having to provide
the corresponding collateral, the newspaper calculates. According
to the report, the six banks included French Societe Generale SA
(GLE.FR) and Italy's UniCredit SpA (UCG.MI).
The banks had, however, provided sufficient other collateral
overall so there was no impact on monetary policy operations, the
newspaper quotes the ECB as saying.
An ECB spokeswoman, asked to remark on the report by Dow Jones
Newswires Sunday, referred to the fact that there was no impact on
the monetary policy operations and said she had no further
comments.
Spokespeople at the Bank of France and Euroclear France weren't
immediately available to comment to Dow Jones Newswires Sunday.
Within the Eurosystem, the Bank of France provides the relevant
data--such as volume, coupon or default risk--on short-term
European paper to the ECB. The ECB says it has little information
about that market segment and refers to the BOF, according to the
newspaper.
According to the ECB, in 113 cases the risk valuation discounts
for STEP collateral calculated by the BOF were wrong, the newspaper
says.
Bank of France said it gets the data exclusively from Euroclear
France, the newspaper reports. Euroclear France belongs to
Euroclear Group which also owns Euroclear Bank, itself a big player
in the European short-term paper market, that could cause
substantial conflict of interest, the newspaper writes.
In recent years, the ECB has substantially expanded the list of
securities it accepts as collateral in monetary policy refinancing
operations.
In November, the same newspaper uncovered that the Bank of Spain
rated certain Spanish sovereign debt better than the Eurosystem
rating rules would have allowed. Since then, national central banks
have come under additional scrutiny. However, the valuation of STEP
paper by Euroclear France hasn't yet been changed.
Newspaper website: http://www.welt.de
(Hans Bentzien contributed to this report.)
Write to the Frankfurt Bureau at
djnews.frankfurt@dowjones.com