More specifically, their legality is safeguarded by virtue of the risk management measures with which they are associated, to ensure that the Eurosystem would not suffer losses if the collateral were realised. In this way, the ACCs which are not loss sharing like the standard monetary policy instruments, can be classified as “adequate collateral” in accordance with Article 18.1 of the Statute of the ESCB. Even though the tools we use are not new and had been deployed previously, we adapted them further during the current crisis. At the same time, our actions complemented other European or national policies, such as the provision of public sector guarantees on the fiscal side. Taken together, these measures have reinforced the effectiveness of liquidity support offered to the real economy. We should ensure, however, that the collateral easing measures do not inadvertently lead to further fragmentation and the re-introduction of a Tier-2 collateral framework. More importantly, they should respect the level playing field throughout the euro area. It is true that the expansion of the ACC frameworks can increase the overall complexity and opaqueness of the ACC collateral landscape. The country-specific legal and institutional features of these frameworks could give rise to additional legal risks in relation to our collateral framework. Therefore, as with the PEPP, it is crucial that our collateral easing packages are designed as strictly temporary measures that will remain in place until September 2021 or only as long as the direct consequences of the pandemic are with us.

The requirements set by the authority are in line with those prescribed by Basle, including the riskweight approach to assess capital adequacy, with weights of 0%, 20%, 50% and 100%, the division of the constituents of capital in tiers 1 and 2 and capital required to cover exchange risk and interest rate risk. Additional measures to strengthen prudential rules in Brazil included regulations issued in 1998 (internal controls), 1999 (credit risk classification) and 2000 (liquidity risk). As a result of the internal controls regulation (Resolution 2554), the board of directors is considered responsible for the smooth functioning of the internal control system, internal auditors must present semi-annual report on the quality and effectiveness of internal controls and supervision can restrict activities and operations where the internal controls are not satisfactory. Resolution 2682, on credit risk classification, introduced a forward-looking approach, specifying that loans must be classified not only according to their past due status, as it was previously done, but also based on the creditworthiness of borrower and on the nature of the transaction. Banks, according to Resolution 2.804 must follow specific liquidity management policies, such as: sound liquidity practices, the use of alternative scenarios and the application of stress tests (reviewed by supervisors). Returning to the implementation of Basle II, supervision in Brazil is as yet undecided with respect to the date of implementation or the timetable to be followed, as this will depend very much on the intentions and readiness of the banks and on the existence of robust and consistent databases and models.