ECB takes unprecedented steps to preserve credit provision
Central bank accepts state-guaranteed loans as collateral, reduces haircuts
The European Central Bank unveiled an unprecedented set of measures on April 7 to ensure eurozone banks maintain both liquidity access and credit provision during the Covid-19 crisis.
The ECB’s governing council decided to simultaneously reduce the haircuts it imposes on the value of collateral posted by banks and broaden the assets institutions can post in exchange for liquidity. The actions will add risk to the central bank’s balance sheet and remove it from the banking sector.
The central
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