Opinion of the European Central Bank of 1 February 2011 on amendments to the national monetary policy operations framework with a view to further harmonising it with the Eurosystem (CON/2011/7)
Date: 2011-02-01
Institutions: European Central Bank
Subjects: Eurosystem, Lithuania, monetary integration, monetary policy, national law

EN 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 1 February 2011 

on amendments to the national monetary policy operations framework with a view to further 

harmonising it with the Eurosystem 

(CON/2011/7) 

Introduction and legal basis 

On 10 December 2010 the European Central Bank (ECB) received a request from Lietuvos bankas for an 

opinion on the recast of the Regulations on selection, valuation and publishing of eligible assets used as 

underlying assets in credit operations of Lietuvos bankas (hereinafter the ‘draft regulations’). 

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning of the European Union and Article 2(2) of Council Decision 98/415/EC of 29 June 1998 on 

the  consultation  of  the  European  Central  Bank  by  national  authorities  regarding  draft  legislative 
provisions1,  as  the  draft  regulations  relate  to  instruments  of  monetary  policy  in  a  Member  State  whose 

currency is not the euro. In accordance with the first sentence of Article 17.5 of the Rules of Procedure of 

the European Central Bank, the Governing Council has adopted this opinion. 

1.  

Purpose of the draft regulations 

The  main  objective  of  the  draft  regulations  is  to  further  harmonise  the  monetary  policy  operations 

framework  of  Lietuvos  bankas  with  that  of  the  Eurosystem  by:  (a)  separating  the  eligibility  criteria 

applicable  to  the  assets  used  for  collateralisation  of  intraday  credit  in  euro  and  of  all  other  credit 

operations  of  Lietuvos  bankas,  (b)  specifying  credit  standards  for  eligible  assets,  (c)  referring  in  its 

monetary policy framework to the Eurosystem monetary policy framework. 

2. 

General observations 

2.1  Although  Member  States  whose  currency  is  not  the  euro  retain  their  powers  in  the  field  of 

monetary  policy,  it  is  beneficial  for  them  to  gradually  achieve  consistency  with  the  operational 

framework  for  the  implementation  of  the  ECB’s  monetary  policy  so  that  credit  institutions 

operating  in  their  territories  can  become  acquainted  with  the  requirements  that  will  apply  once 

these Member States have adopted the euro. Such gradual harmonisation prior to the adoption of 

the euro will contribute to the smooth integration of the national central bank into the Eurosystem. 

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OJ L 189, 3.7.1998, p. 42.  

 
 
 
 
 
                                                 
2.2  The  ECB  has  previously  commented  on  other  Lithuanian  regulations  on  monetary  policy 
instruments,  in  particular  the  Lithuanian  minimum  reserves  regime2.  In  its  opinions,  the  ECB 

emphasised  the  need  to  further  align  the  Lithuanian  minimum  reserves  regime  with  Eurosystem 

standards,  including  the  fact  that  the  Lithuanian  credit  unions  will  also  be  subject  to  the 

Eurosystem’s minimum reserves requirements when Lithuania adopts the euro. The ECB observes 

that all comments previously made on the Lithuanian minimum reserves regime are still valid. 

2.3  The ECB welcomes the provisions of the draft regulations that will contribute to the alignment of 

the monetary policy operations framework of Lietuvos bankas with that of the Eurosystem. 

3. 

Specific observations 

3.1 

Implications  of  the  draft  regulations  for  the  selection  of  assets  eligible  for  collateralisation  of 

intraday credit operations in TARGET2 by Lietuvos bankas as a connected central bank 

3.1.1  Lietuvos bankas concluded an agreement with the Eurosystem central banks on connection to the 
Trans-European  Automated  Real-time  Gross  settlement  Express  Transfer  system  (TARGET2)3. 

This agreement specifies, inter alia, that the connected central banks will comply with Guideline 

ECB/2007/2 of 26 April 2007 on a Trans-European Automated Real-time Gross settlement Express 
Transfer  system  (TARGET2)4,  subject  to  any  mutually  agreed  appropriate  qualifications  and 

modifications.  

3.1.2  Lietuvos  bankas,  as  a  connected  central  bank,  may  provide  intraday  credit  in  TARGET2  to  its 

participants under certain conditions. Such intraday credit must be collateralised by eligible assets 

which meet the same quality standards and are subject to the same valuation and risk control rules 
as those prescribed for eligible collateral for Eurosystem monetary policy operations5. Therefore, in 

providing intraday credit in TARGET2 and selecting the eligible collateral in this context, Lietuvos 

bankas  is  bound  by  the  Eurosystem  monetary  policy  framework  as  set  out  in  Guideline 
ECB/2000/7 of 31 August 2000 on monetary policy instruments and procedures of the Eurosystem6 

(hereinafter the ‘General Documentation’). 

3.2  Further specification of the rules applicable to intraday credit in euro  

The draft regulations apply to all credit operations of Lietuvos bankas, including intraday credit in 

euro.  Since  Lietuvos  bankas  is  bound  by  the  General  Documentation  only  as  regards  the 

collateralisation of intraday credit in euro in TARGET2, the ECB welcomes the specification in the 

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5  

6  

See Opinions CON/2005/8 and CON/2008/66. All opinions are published on the ECB’s website at www.ecb.europa.eu. 
The  national  central  banks  of  non-participating  Member  States  may  only  connect  to  TARGET2  if  they  conclude  an 
agreement with the Eurosystem central banks, see Article 4 of Guideline ECB/2007/2. 
OJ L 237, 8.9.2007, p. 1. 
Paragraph 4 of Annex III of Guideline ECB/2007/2 provides: ‘Intraday credit shall be based on eligible collateral and granted 
by  means  of  collateralised  intraday  overdrafts  and/or  intraday  repurchase  transactions  in  compliance  with  the  additional 
minimum  common  features  (including  the  events  of  default  therein  listed,  as  well  as  their  respective  consequences)  that  the 
Governing Council specifies with respect to Eurosystem monetary policy operations. Eligible collateral shall consist of the same 
assets and instruments as eligible assets for Eurosystem monetary policy operations, and shall be subject to the same valuation 
and risk control rules as those laid down in Annex I to Guideline ECB/2000/7’. 
OJ L 310, 11.12.2000, p. 1. 

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draft  regulations  of  (a)  the  relevant  eligibility  criteria7  to  be  applied  to  the  assets  used  for 

collateralisation of intraday credit in euro in TARGET2, and (b) the relevant eligibility criteria to 

be  applied  to  the  assets  used  for  collateralisation  of  other  credit  operations  of  Lietuvos  bankas. 

However, the ECB recommends further specification also for other rules, in particular as regards 

credit  standards  including  rules  for  credit  assessment  and  guarantees,  and  risk  control  measures 

including the relevant valuation haircuts. 

3.3  Additional currency valuation haircut 

As  regards  the  additional  2%  valuation  haircut  applicable  to  the  valuation  of  securities 
denominated in litai which are used to collateralise Lietuvos bankas’s intraday credit in euro8, the 

ECB agrees with this additional haircut. Close cooperation with the ECB on an annual basis will 

ensure  also  in  the  future  that  the  currency  risk  is  appropriately  addressed  and  takes  into  account 

changing circumstances in the markets and other possible factors. 

3.4  References to the Eurosystem monetary policy framework 

Some  provisions  of  the  draft  regulations  replicate  provisions  from  the  General  Documentation 

without  any  additional  qualification.  Other  provisions  from  the  General  Documentation  are 

qualified to reflect particularities of the Lithuanian market. Such qualifications include, inter alia, 
acceptance  of  securities  registered  exclusively  with  the  Lithuanian  central  securities  depository9 
and of guarantees which are regulated exclusively under Lithuanian law10. There are also several 

direct references to the General Documentation. 

The  ECB  recommends:  (a)  using  references  to  the  General  Documentation  where  the  aim  of  the 

specific  provision  is  to  replicate  the  General  Documentation’s  provisions  without  any  additional 

qualification,  and  (b)  replicating  the  General  Documentation’s  provisions  in  the  national  rules 

where they are further qualified. In any case, it must be ensured that (a) there is clarity as to which 

rules  of  the  General  Documentation  apply  and  where  there  is  divergence  from  such  rules,  and 

(b) the national rules applicable to the collateralisation of the Lietuvos bankas’s intraday credit in 

euro  in  TARGET2  meet  the  minimum  requirements  established  by  the  General  Documentation. 

This means that any divergence from the rules of the General Documentation is only permissible if 

it contains more restrictive eligibility criteria. 

7  

8  
9  
10  

Including  type  of  asset,  acceptable  markets,  currency  of  denomination,  settlement  procedures,  type  of/place  of 
establishment of the issuer/guarantor, place of issue. 
Paragraph 19 of the draft regulations. 
Paragraph 6.8 of the draft regulations. 
Paragraph 11.4 of the draft regulations. 

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This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 1 February 2011. 

[signed] 

The President of the ECB 

Jean-Claude TRICHET 

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