ECB closes in on inferior collateral with new haircut scheme

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The European Central Bank (ECB) on Wednesday unveiled a scheme of haircuts to be levied on collateral against its loans, which, for the first time, introduce liquidity categories as a measure of an asset's quality.

The graduated haircuts, which were first flagged by the ECB in April, replace the flat 5% discount levied on assets rated between BBB- and BBB+, with each instrument's maturity and liquidity category now also playing a role in determining the size of the haircut.

The five liquidity ca

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