Just weeks after the European Central Bank tightened its
rules on the assets banks can use as collateral in central bank
lending operations, it’s thinking about broadening them again.
At a summit in Paris on Sunday, euro zone governments
suggested the ECB follow the U.S. Federal Reserve’s lead in
accepting commercial paper, the short-term debt which many
companies use to fund their day-to-day operations.
Europe’s commercial paper market is worth $800 billion, and
the ECB said it would consider changing the rules on
accepting the paper, which must meet the same high standards
applied to long-term corporate and government debt.
The ECB said on Sept. 4 it would toughen these standards to
stop banks taking advantage of its relatively generous rules and
creating artificial instruments to get their hands on central
“What we are going to look at is … how we can widen the terms of our rules to have an even broader system of guarantees than we have today,” ECB President Jean-Claude Trichet said on Sunday.