ECB revamps collateral rules, setting terms for rescued banks and bringing climate and tokenized assets into its framework

FRANKFURT, Germany — The European Central Bank is quietly rewriting some of the most technical but consequential rules in the euro area’s financial system, setting new conditions for how rescued banks can tap central-bank cash, tightening the collateral banks can pledge for funding and weaving climate and digital finance into the core of its operations.

In a decision published Jan. 27, the ECB said it had amended its guidelines on how monetary policy is implemented across the Eurosystem, with changes taking effect March 30. The move updates who can access the ECB’s lending operations and what assets count as collateral — the plumbing that underpins money markets, bank funding and crisis management.

Together, the changes establish a clearer path for banks emerging from resolution to regain access to ECB liquidity, complete the legal roll-out of post-pandemic collateral “normalization,” introduce a climate-risk adjustment to corporate collateral and recognize fully digital and distributed-ledger-based securities in the ECB’s collateral universe.

“The amendments will apply from 30 March 2026 and aim to enhance the harmonisation, flexibility and risk efficiency of the collateral framework,” the ECB said.

A clearer route back to ECB liquidity after resolution

The centerpiece of the package is a new rule that will allow banks undergoing an “open bank” resolution — a formal rescue in which the institution keeps operating — to be reinstated as regular counterparties in ECB operations once strict conditions are met. Until now, banks in resolution could see their access to central-bank liquidity suspended or restricted at the ECB’s discretion.

Under the new guidelines, entities subject to a resolution scheme built on an open bank strategy may regain access if, among other checks, their supervisor confirms they meet minimum regulatory capital requirements. The ECB said access could be restored “provided they meet certain conditions,” including confirmation that “the counterparty complies with regulatory minimum own funds requirements.”

The change addresses a gap in Europe’s bank crisis playbook. Under the Bank Recovery and Resolution Directive and the Single Resolution Mechanism Regulation, authorities can restructure a failing bank, impose losses on shareholders and creditors through “bail-in” and recapitalize it so that it can remain open. But even a recapitalized institution can face intense liquidity pressure from deposit outflows and frozen wholesale funding.

Central-bank funding is often crucial to keep that bank functioning while confidence rebuilds. At the same time, providing such liquidity is politically sensitive, because it can be seen as an indirect taxpayer backstop if extended to a weak or non-viable institution.

By spelling out conditions for reinstating access, the ECB is trying to balance those concerns. Lending will remain secured against eligible collateral and subject to the same haircuts and risk controls as for any other counterparty.

The move also dovetails with a broader reform of the European Union’s crisis-management and deposit-insurance framework. In June 2025, EU lawmakers struck a political deal on the so-called CMDI package to make it easier to resolve small and medium-sized banks, in part by widening the use of industry-funded safety nets. Resolution authorities and supervisors have long argued that a predictable central-bank liquidity backstop is a missing piece needed to make resolution a credible alternative to taxpayer-funded bailouts.

Post-pandemic “normalization” becomes binding policy

While the new access rule looks ahead to future crises, most of the other amendments codify a shift away from the emergency footing adopted during the COVID-19 shock.

Since the global financial crisis, the ECB has run a dual collateral system: a permanent “general framework” defining standard assets it will accept, and a “temporary framework” housing crisis-era easing such as national additional credit claim (ACC) schemes and lower quality thresholds. In April 2020, as the pandemic hit, the ECB broadened the list dramatically, accepting more types of loans, easing credit-quality rules and cutting haircuts to ensure banks had enough collateral to obtain funding.

From 2022 onward, the ECB began rolling those measures back. In November 2024, it announced which temporary measures would be integrated into the permanent framework and which would be phased out. The Jan. 27 legal acts put those earlier decisions into binding form.

Some assets that were once temporary will now be part of the permanent collateral toolkit:

• Asset-backed securities rated as low as BBB- move into the general framework under defined conditions.
• Marketable assets denominated in U.S. dollars, British pounds and Japanese yen become part of the standard list.
• National central banks’ internal credit assessment systems (S-ICAS) gain full recognition as credit-assessment sources.

At the same time, several instruments are being discontinued or run down:

• Private-individual and real-estate-backed loan pools used in national ACC frameworks will no longer be accepted.
• Individual credit claims below a certain credit-quality step, and foreign-currency loans pledged through ACCs, will be excluded.
• Two rarely used asset types — retail mortgage-backed debt instruments and non-marketable debt backed by credit claims — are being removed from the general framework.

The ECB has framed these steps as an effort to simplify and harmonize a collateral regime that became increasingly complex and nationally fragmented during the crisis years, while maintaining adequate collateral availability.

Climate risk enters collateral valuation

Another strand of the overhaul brings climate considerations directly into the ECB’s collateral risk controls. In a separate decision last year, the ECB’s Governing Council agreed to introduce a “climate factor” for marketable assets issued by non-financial corporations. From June 15, the central bank will apply an adjustment to the value it assigns to such collateral based on the issuer’s exposure to climate-transition risk.

“To protect the Eurosystem against potential declines in the value of collateral in the event of adverse climate-related transition shocks, a climate factor will be introduced,” the ECB said, reiterating its earlier announcement.

The factor will draw on forward-looking climate scenarios, internal climate scores developed through the ECB’s corporate bond purchase programs, sector stress-test data and the residual maturity of the security. Assets seen as more vulnerable to transition shocks will face larger valuation discounts when posted as collateral. The ECB has said the measure is calibrated to preserve adequate collateral availability and targets transition risks rather than physical climate damage.

Although presented as a prudential step to manage balance-sheet risk, the tool may influence market behavior at the margin. Banks could find it more attractive to hold and pledge bonds from issuers better aligned with Europe’s climate policies, while issuers in more carbon-intensive sectors could see their bonds become somewhat less valuable as central-bank collateral.

Digital and DLT securities move closer to eligibility

The ECB is also updating its framework to reflect the digital evolution of capital markets. The Jan. 27 guideline broadens the eligibility of international debt instruments issued through international central securities depositories in fully dematerialized form, or other non-global-note formats, as long as they meet the usual legal and operational criteria.

On the same day, the central bank took a first step toward accepting tokenized securities as collateral. From March 30, it will allow marketable assets issued in central securities depositories using distributed ledger technology to qualify as eligible Eurosystem collateral, provided they meet standard eligibility rules and are settled in securities settlement systems that comply with EU regulation and are reachable via its Target2-Securities platform.

The ECB signaled it is not yet ready to accept assets issued and settled entirely on standalone distributed-ledger platforms outside today’s central-securities-depository infrastructure, and said it will take a “staggered approach” to exploring under what conditions such fully on-chain instruments could eventually qualify.

Why the plumbing matters

The combination of climate-sensitive valuation adjustments, tighter collateral rules and new eligibility criteria for digital instruments may appear far removed from headline interest-rate decisions. But these rules shape how easily banks can borrow from the central bank, which assets they prefer to hold on their balance sheets and how Europe’s bank resolution regime will function in practice.

Those effects will come into sharp focus only in the next significant bank failure, climate-related market shock or large-scale tokenized issuance. When that moment comes, the technical guidelines the ECB adopted in early 2026 will help determine which institutions can plug into its balance sheet, on what terms and with which assets — and, ultimately, how resilient the euro area’s financial system proves to be.