Under the terms of Article 18.1 of the ESCB statute, all credit operations conducted by counterparties with the Bank must be based on adequate collateral provided to the Bank by its counterparties.
We require a specified margin to be maintained over time on the underlying assets used in our credit operations, i.e., liquidity-providing reverse transactions. If the value of the underlying assets falls below a certain level,we will require the counterparty to supply additional assets (i.e., a margin call). Similarly, if the value of the underlying assets, following their revaluation, exceeds a certain level, we return excess assets to the counterparty on request.
Counterparties may use eligible assets on a cross-border basis. The Correspondent Central Banking Model (CCBM) was developed by the ESCB to ensure that all eligible assets may be used on a cross-border basis. Under this model, which has been operated by the Bank and the other euro-area NCBs since 4 January 1999, central banks act as custodians (correspondents) for each other in respect of securities accepted in their local depository or settlement system.