This chapter documents in detail the haircut policy of the Eurosystem and how it has evolved over time. A detailed description of haircuts necessarily also provides further information on the large range of collateral that banks can use to obtain credit from the Eurosystem and how eligibility rules have been relaxed over the course of the financial crisis. The chapter ends by presenting evidence on the Eurosystem's haircuts across different types of collateral versus those applied in two widely used and comparable central counterparty (CCP) contracts.

DOCUMENTATION AND OVERVIEW

The ECB provides a list of documents that describe the collateral framework, including the rules for collateral eligibility and haircuts, on a dedicated webpage. These documents are also published in the Official Journal of the European Union and represent legally binding acts or decisions. In addition to the publication date itself, each of these documents shows the date when the act, or decision, was legally adopted. These “adopted on,” or formal approval, dates should not be confused with press-release dates; the ECB sometimes communicates decisions by the Governing Council through press releases before they become legal acts, if at all. When describing the haircut rules in this chapter, and the ratings rules in the next, I have relied on the contents of the legal documentation provided by the ECB on its webpage and published in the Official Journal.

The earliest dated collateral framework document posted on the ECB's webpage is the Guideline of the European Central Bank of 31 August 2000 on monetary policy instruments and procedures of the Eurosystem (ECB 2000/7). The preamble to this document establishes that it is produced under the “Treaty establishing the European Community”: