Guideline (EU) 2016/2299 of the European Central Bank of 2 November 2016 amending Guideline (EU) 2016/65 on the valuation haircuts applied in the implementation of the Eurosystem monetary policy framework (ECB/2016/32)

1 In accordance with Title VI of Part Four of Guideline (EU) 2015/510 (ECB/2014/60), marketable assets shall be subject to valuation haircuts, as defined in point 97 of Article 2 of Guideline (EU) 2015/510 (ECB/2014/60), at the levels set forth in Tables 2 and 2a in the Annex to this Guideline.

2 The valuation haircut for a specific asset depends on the following factors: (a) the haircut category to which the asset is allocated, as defined in Article 2; (b) the residual maturity or the weighted average life of the asset, as defined in Article 3; (c) the coupon structure of the asset; and (d) the credit quality step to which the asset is allocated’;

1 The valuation haircuts for marketable assets allocated to haircut categories I to IV shall be determined based on: (a) the allocation of the specific asset to credit quality step 1, 2 or 3; (b) the residual maturity of the asset as detailed in paragraph 2; (c) the coupon structure of the asset as detailed in paragraph 2.

2 For marketable assets allocated to haircut categories I to IV, the applicable valuation haircut shall depend on the residual maturity and coupon structure as follows. (a) For marketable assets with zero and fixed rate coupons, the applicable valuation haircuts shall be determined based on Table 2 in the Annex to this Guideline. The relevant maturity for determining the valuation haircut shall be the residual maturity of the asset. (b) For marketable assets with floating coupons, the applicable valuation haircuts shall equal the valuation haircut applied to fixed coupon marketable assets with zero-to-one year residual maturity, except in the following cases: (i) floating coupons with a resetting period longer than one year shall be treated as fixed rate coupons and the relevant maturity for the valuation haircut to be applied shall be the residual maturity of the asset; (ii) floating coupons that have a euro area inflation index as a reference rate shall be treated as fixed rate coupons and the relevant maturity for the valuation haircut to be applied shall be the residual maturity of the asset; (iii) floating coupons with a floor that does not equal zero and/or floating coupons with a ceiling shall be treated as fixed rate coupons. (c) The valuation haircut applied to assets that have more than one type of coupon structure shall solely depend on the coupon structure in place during the remaining life of the asset and shall equal the highest haircut applicable to a marketable asset with the same residual maturity and credit quality step. Any type of coupon structure in place during the remaining life of the asset may be considered for this purpose.

3 For marketable assets allocated to haircut category V, regardless of their coupon structure, the valuation haircuts shall be determined based on the weighted average life of the asset as detailed in paragraphs 4 and 5. The valuation haircuts applicable to marketable assets in category V are laid down in Table 2a in the Annex to this Guideline.

4 The weighted average life of the senior tranche of an asset-backed security shall be estimated as the expected weighted average time remaining until repayment has been made for that tranche. For retained mobilised asset-backed securities, the calculation of the weighted average life shall assume that issuer call options will not be exercised.

5 For the purposes of paragraph 4, “retained mobilised asset-backed securities” shall mean asset-backed securities used in a percentage greater than 75 % of the outstanding nominal amount by a counterparty that originated the asset-backed security or by entities closely linked to the originator. Such close links shall be determined in accordance with Article 138 of Guideline (EU) 2015/510 (ECB/2014/60).’;

1 This Guideline shall take effect on the day of its notification to the national central banks of the Member States whose currency is the euro.

2 The national central banks of the Member States whose currency is the euro shall take the necessary measures to comply with this Guideline and apply them from 1 January 2017. They shall notify the ECB of the texts and means relating to those measures by 5 December 2016 at the latest.

This Guideline is addressed to the national central banks of the Member States whose currency is the euro.