Navigation Path: Home > Payments & Markets > Collateral > ECAF > ECAI
The ECAI source encompasses those institutions whose credit assessments may be used by credit institutions for the determination of risk weight exposures according to the CRD. For the purposes of the ECAF, the general acceptance criteria for ECAIs are the following:
The Eurosystem reserves the right to decide whether it accepts an ECAI for its lending operations, making use, among other factors, of its performance monitoring process.
The rating requirements for asset-backed securities (ABSs) accepted for use as collateral in Eurosystem credit operations currently differentiate among ABSs depending on their issuance date. In addition, the Eurosystem differentiates between the rating requirement at issuance and the rating requirement over the lifetime of the ABS transaction. Furthermore, owing to grandfathering provisions applicable until 1 March 2011, the number of required rating opinions differs depending on the date of issuance of the ABS transaction.
The following table provides an overview of the applicable rating rules:
| Requirement | ABS issued before 01 March 09 | ABS issued between 01 March 2009 and 28 February 2010 | ABS issued as of 01 March 2010 |
|---|---|---|---|
| First Rating requirement at issuance (1st rating) | A-/A3/AL | AAA/Aaa | AAA/Aaa |
| Second Rating requirement at issuance (2nd rating) | A-/A3/AL | A-/A3/AL | AAA/Aaa |
| Rating requirement over the lifetime | A-/A3/AL | A-/A3/AL | A-/A3/AL |
| Number of required ratings until 28 Feb. 2011 | single rating/first best rule | single rating/first best rule | two ratings/second best rule |
| number of required ratings as of 01 March 2011 | two ratings/second best rule | two ratings/second best rule | two ratings/second best rule |
As the table shows, from 1 March 2011 the requirement to have two-ratings and the second best-rule will be applied to all ABSs regardless of their issuance date. The second best-rule means that not only the best, but also the second-best available ECAI credit assessment must comply with the credit quality threshold for ABS. In case of ABS issued before 1 March 2010 that have initially one rating from an ECAI, a second rating must be additionally obtained before 1 March 2011.
As it can be seen in the table above, for ABS issued before 1 March 2009, both the first and the second ratings must comply with the ‘single A’ level over the life of the security in order for the ABS to remain eligible.
For ABS issued between 1 March 2009 and 28 February 2010, the first rating must comply with the ‘AAA/Aaa’ level at issuance and the ‘single A’ over the life of the security, while the second rating must comply with the ‘single A’ level both at issuance (in respect of the required second ECAI rating for those ABS ‘credit assessment at issuance’ refers to the credit assessment when first issued or published by the ECAI) and over the life of the security in order for the ABS to remain eligible.
For ABS issued after 1 March 2010, both the first and the second ratings must comply with the ‘AAA’/‘Aaa’ level at issuance and the ‘single A’ level over the life of the security in order for the ABS to be eligible.
Furthermore, according to the “General documentation on Eurosystem monetary policy instruments and procedures” (section 6.3.1), the Eurosystem reserves the right to determine whether an issue, issuer, debtor or guarantor fulfils its requirements for high credit standards on the basis of any information it may consider relevant, and may reject or limit the use of assets or apply supplementary haircuts if required to ensure adequate risk protection of the Eurosystem, in line with Article 18.1 of the Statute of the European System of Central Banks and of the European Central Bank.
