The new collateral rules will also apply to public sector assets outside the Eurozone.

On February 21, 2025, the European Central Bank (ECB) announced plans to tighten collateral rules for lending operations in response to the increasing number of accepted credit rating agencies.

The ECB's new approach will enforce stricter criteria for accepting private sector assets as collateral for loans to banks.

This change will impact a variety of private sector securities, including unsecured bank bonds, covered bank bonds, assets issued by non-financial corporations, and non-euro area public sector securities.

This decision will take effect 18 months from the announcement date, allowing time for necessary technical implementation.

Currently, commercial banks can borrow unlimited funds from the ECB if they provide suitable collateral, although these lending operations are underutilized due to banks holding excess liquidity.

Starting in August 2026, the ECB will utilize the second-best credit rating from external credit rating agencies for assessing collateral eligibility on selected private sector assets.

Typically, banks present various private sector assets as collateral, including unsecured bank bonds, secured bank bonds, and corporate-issued assets.

Under the new rules, if an asset is rated by only one agency, the ECB will downgrade its rating by one level, preventing the selection of a second-best rating.

However, the ECB's rules for assets issued or guaranteed by the euro area public sector will remain unchanged, continuing to rely on the best credit rating.