Bloomberg News

Bank of Spain Says It Obeyed ECB Collateral Rules for Bank Loans

November 05, 2012

The Bank of Spain said it has correctly applied the European Central Bank’s collateral rules when assessing the quality of assets pledged by Spanish lenders in return for ECB loans.

The discount on Spanish debt pledged as collateral is based on the credit rating of DBRS Inc., said a Bank of Spain spokesman, who asked not to be named in line with the central policy. German newspaper Die Welt reported yesterday that Spanish treasury bills used as collateral in refinancing operations only partially fulfilled ECB requirements and banks received as much as 16.6 billion euros ($21.3 billion) of loans they shouldn’t have if quality rules had been strictly followed.

The ECB is investigating the matter, a spokesman said.

Toronto-based DBRS rates debt issued by the Spanish government at ‘A Low,’ its seventh-highest investment-grade rating. That’s two steps higher than Fitch Ratings and three steps higher than Moody’s Investors Service and Standard & Poor’s. The ECB takes smaller haircuts on securities with an A- rating, according to the central bank’s website.

The Bank of Spain yesterday applied a valuation of 95.067 percent to 2 billion euros of Spanish treasury bills due 2014, according to the Madrid-based central bank’s website. That is lower than the 96.66 percent closing price of the securities, according to Bloomberg prices.

The ECB applies a 1.5 percent haircut to zero-coupon government debt with a residual maturity between one or three years and a rating better than A minus.

To contact the reporter on this story: Esteban Duarte in Madrid at

To contact the editor responsible for this story: Paul Armstrong at

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