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#ECB announces package of temporary collateral easing measures

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The Governing Council of the European Central Bank (ECB) today (8 April) adopted a package of temporary collateral easing measures to facilitate the availability of eligible collateral for Eurosystem counterparties to participate in liquidity providing operations, such as the targeted longer-term refinancing operations (TLTRO-III).

The package is complementary to other measures recently announced by the ECB, including additional longer-term refinancing operations (LTROs) and the Pandemic Emergency Purchase Programme (PEPP) as a response to the coronavirus emergency. The measures collectively support the provision of bank lending especially by easing the conditions at which credit claims are accepted as collateral. At the same time the Eurosystem is increasing its risk tolerance to support the provision of credit via its refinancing operations, particularly by lowering collateral valuation haircuts for all assets consistently.

The emergency collateral package contains three main features.

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First, the Governing Council decided on a set of collateral measures to facilitate an increase in bank funding against loans to corporates and households. This will be achieved by expanding the use of credit claims as collateral, in particular through the potential expansion of the additional credit claims (ACCs) frameworks. The ACC framework provides the possibility to National Central Banks to enlarge the scope of eligible credit claims for counterparties in their jurisdictions. This includes the possibility to accept loans with lower credit quality, loans to other types of debtors, not accepted in the ECB’s general framework, and foreign-currency loans.

In this respect, the Governing Council decided to temporarily extend the ACC frameworks further by:

  • Accommodating the requirements on guarantees to include government and public sector guaranteed loans to corporates, SMEs and self-employed individuals and households in the ACC frameworks in order to also provide liquidity against loans benefiting from the new guarantee schemes adopted in eurozone member states as a response to the coronavirus pandemic;
  • Enlarging the scope of acceptable credit assessment systems used in the ACC frameworks, for example by easing the acceptance of banks’ own credit assessments from internal rating-based systems that are approved by supervisors;
  • Reducing the ACC loan level reporting requirements to allow counterparties to benefit from the ACC frameworks even before the necessary reporting infrastructure is put in place.

Second, the Governing Council further adopted the following temporary measures:

  • A lowering of the level of the non-uniform minimum size threshold for domestic credit claims to EUR 0 from EUR 25,000 previously to facilitate the mobilization as collateral of loans from small corporate entities;
  • An increase, from 2.5% to 10%, in the maximum share of unsecured debt instruments issued by any single other banking group in a credit institution’s collateral pool. This will enable counterparties to benefit from a larger share of such assets.
  • A waiver of the minimum credit quality requirement for marketable debt instruments issued by the Hellenic Republic for acceptance as collateral in Eurosystem credit operations.

Third, the Governing Council decided to temporarily increase its risk tolerance level in credit operations through a general reduction of collateral valuation haircuts by a fixed factor of 20%. This adjustment aims to contribute to the collateral easing measures while maintaining a consistent degree of protection across collateral asset types, albeit at a temporarily lower level.

These measures are temporary for the duration of the pandemic crisis and linked to the duration of the PEPP. They will be re-assessed before the end of 2020, also considering whether there is a need to extend some of these measures to ensure that Eurosystem counterparties’ participation in its liquidity providing operations is not adversely affected.

In addition, as part of the regular review of its risk control framework, the Governing Council decided to adjust the haircuts applied to non-marketable assets, both in the general collateral framework and for ACCs, by fine-tuning some of the haircut parameters. This adjustment, which is not linked to the duration of the PEPP, applies in addition to the temporary haircut reduction and thus further supports the collateral easing measures while maintaining adequate risk protection. This leads on average to a further haircut reduction of this type of collateral by around 20%.

Furthermore, the Governing Council has mandated the Eurosystem committees to assess measures to temporarily mitigate the effect on counterparties’ collateral availability from rating downgrades arising from the economic impact of coronavirus, while continuing ensuring collateral adequacy.

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EU Digital COVID Certificate: Commission adopts equivalence decisions for Vatican and San Marino certificates

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The Commission has adopted decisions ensuring that COVID-19 certificates issued by the Vatican City State and San Marino will be considered equivalent to the EU Digital COVID Certificate. This means that both countries will be connected to the EU's system and that COVID certificates issued by the Vatican and San Marino will be accepted in the EU under the same conditions as the EU Digital COVID Certificate. In practice, holders of these certificates will be able to use these certificates under the same conditions as holders of an EU Digital COVID Certificate. At the same time, the Vatican and San Marino have indicated that they would accept EU Digital COVID Certificates for travel to their countries.

Justice Commissioner Didier Reynders said: “I am pleased to see that more countries are implementing a system based on the EU Digital COVID Certificate. We are taking active steps to recognize certificates issued by other third countries. However, they must be interoperable with the EU framework and allow for the verification of their authenticity, validity and integrity.”

The Commission decisions on the equivalence of the Vatican and San Marino COVID certificates are available online. The Commission is also working on connecting other third countries. It checks if their certificates are interoperable with the EU Digital COVID Certificate, allowing for the verification of their authenticity, validity and integrity. The Commission can issue an equivalence decision establishing its equivalence with the EU Digital COVID Certificate. More information on the EU Digital COVID Certificate can be found on the dedicated website and Q&A.

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Republican report says coronavirus leaked from China lab - scientists still probing origins

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A computer image created by Nexu Science Communication together with Trinity College in Dublin, shows a model structurally representative of a betacoronavirus which is the type of virus linked to COVID-19, shared with Reuters on 18 February 2020. NEXU Science Communication/via REUTERS

A preponderance of evidence proves the virus that caused the COVID-19 pandemic leaked from a Chinese research facility, said a report by US Republicans released on Monday (2 August), a conclusion that US intelligence agencies have not reached, write Jonathan Landay and Mark Hosenball, Reuters.

The report also cited "ample evidence" that Wuhan Institute of Virology (WIV) scientists - aided by US experts and Chinese and US government funds - were working to modify coronaviruses to infect humans and such manipulation could be hidden.

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Representative Mike McCaul, the top Republican on the House Foreign Affairs Committee, released the report by the panel's Republican staff. It urged a bipartisan investigation into the origins of the COVID-19 coronavirus pandemic that has killed 4.4 million people worldwide. (Graphic on global cases and deaths).

China denies a genetically modified coronavirus leaked from the facility in Wuhan - where the first COVID-19 cases were detected in 2019 - a leading but unproven theory among some experts. Beijing also denies allegations of a cover-up.

Other experts suspect the pandemic was caused by an animal virus likely transmitted to humans at a seafood market near the WIV.

"We now believe it's time to completely dismiss the wet market as the source," said the report. "We also believe the preponderance of the evidence proves the virus did leak from the WIV and that it did so sometime before 12 September, 2019."

The report cited what it called new and under-reported information about safety protocols at the lab, including a July 2019 request for a $1.5 million overhaul of a hazardous waste treatment system for the facility, which was less than two years old.

In April, the top U.S. intelligence agency said it concurred with the scientific consensus that the virus was not man-made or genetically modified. Read more.

US President Joe Biden in May ordered US intelligence agencies to accelerate their hunt for the origins of the virus and report back in 90 days. Read more.

A source familiar with current intelligence assessments said the US intelligence community has not reached any conclusion whether the virus came from animals or the WIV.

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COVID-19 Delta variant gains prevalence in Italy - health institute

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People rest without wearing masks as Italy lifts mandatory masks outdoors thanks to a decline in the coronavirus disease (COVID-19) cases and hospitalizations, in Matera, Italy, 28 June. REUTERS/Yara Nardi

The highly contagious Delta variant of the coronavirus has gained dominance in Italy, the National Health Institute (ISS) said on Friday (30 July), releasing data showing it accounted for 94.8% of cases as of 20 July, writes Emilio Parodi, Reuters.

The variant, first identified in India in December 2020, is now dominant worldwide and has led to a spike in infection rates that has stoked concerns over the global economic recovery.

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In the previous survey based on data from 22 June, the Delta variant represented just 22.7% of cases. By contrast, the Alpha variant accounted for 3.2% of cases as of July 20 against a previous prevalence of 57.8%.

"It is essential to continue the systematic tracking of cases and to complete the vaccination cycle as quickly as possible", ISS President Silvio Brusaferro said in a statement.

The ISS said its survey did not include all variant cases but only those detected on the day it was carried out. It added that the Gamma variant, first identified in Brazil, fell to 1.4% of cases from 11.8% in the past survey.

The institute also pointed out an "extremely small increase" in cases of the Beta variant, first identified in South Africa, which it says is characterised by partial immune evasion.

Italy has registered 128,029 deaths linked to COVID-19 since its outbreak emerged in February last year, the second-highest toll in Europe after Britain and the eighth-highest in the world. It has reported 4.34 million cases to date.

Almost 59% of Italians over 12 years were fully vaccinated as of Friday, while about 10% are awaiting their second dose.

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