Guideline (EU) 2023/832 of the European Central Bank of 16 December 2022 amending Guideline (EU) 2016/65 on the valuation haircuts applied in the implementation of the Eurosystem monetary policy framework (ECB/2015/35) (ECB/2022/49)

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 of the asset (fixed/floating or zero), as determined based on Table 2 in the Annex to this Guideline. The relevant maturity for determining the valuation haircut to be applied shall be the residual maturity of the asset, irrespective of the type of coupon structure.

2a The determination of the residual maturity for own-use covered bonds shall depend on whether the own-use covered bonds have a soft bullet structure or a conditional pass-through structure, as follows: (a) in the case of own-use covered bonds with a soft bullet structure, the residual maturity shall be defined as the maximum length to which the maturity may be extended as reflected in the terms and conditions for the specific covered bond; (b) in the case of own-use covered bonds with a conditional pass-through structure, the residual maturity shall correspond to the [10,15) year category. For the purposes of this paragraph 2a, ‘own-use’ shall mean the submission or use by a counterparty of covered bonds that are issued or guaranteed by the counterparty itself or by any other entity with which that counterparty has close links as determined in accordance with Article 138 of Guideline (EU) 2015/510 (ECB/2014/60).

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).’

In addition to the valuation haircuts laid down in Article 3 of this Guideline, the following additional valuation haircuts shall apply for specific types of marketable assets: (a) all marketable assets allocated to haircut categories II, III, IV and V that are theoretically valued in accordance with the rules contained in Article 134 of Guideline (EU) 2015/510 (ECB/2014/60) shall be subject to an additional valuation haircut in the form of a valuation markdown. The valuation markdown, also for own-use covered bonds, shall depend on the expected residual maturity or, in the case of haircut category V, the weighted average life of the asset, at the levels set out in Table 4 in the Annex to this Guideline. For the purpose of computing the valuation markdown for own-use covered bonds, the expected residual maturity, shall be the originally scheduled maturity date unless and until a maturity extension has been triggered; (b) own-use covered bonds shall be subject to an additional valuation haircut of: (i) 8 % applied to the value of the debt instruments allocated to credit quality steps 1 and 2; and (ii) 12 % applied to the value of the debt instruments allocated to credit quality step 3. For the purposes of this paragraph, “own-use” shall have the same meaning as “own-use” as defined in Article 3(2a); (c) if the additional valuation haircut referred to in paragraph (b) cannot be applied with respect to a collateral management system of an NCB, triparty agent, or TARGET for auto-collateralisation, the additional valuation haircut shall be applied in such systems or platform to the entire issuance value of the covered bonds that can be own used.’

1 This Guideline shall take effect on the day of its notification to the NCBs.

2 The NCBs shall take the necessary measures to comply with this Guideline and apply them from 29 June 2023. They shall notify the ECB of the texts and means relating to those measures by 17 February 2023 at the latest.

This Guideline is addressed to the NCBs.