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ECB Changes Collateral Rules as It Seeks to Boost Lending

The European Central Bank altered its collateral rules for refinancing banks and said it’s looking at ways to boost lending to small- and medium-sized enterprises.

The Frankfurt-based ECB will reduce the risk premium, or haircut, applicable to asset-backed securities to 10 percent from 16 percent, according to an e-mailed statement today. It’ll also lower the quality threshold for six ABS classes that are subject to loan-level reporting requirements to two A- ratings from two AAA ratings. At the same time, the central bank will tighten rules for retained covered bonds so the total effect on eligible collateral will be “overall neutral,” it said.