While perhaps seeming appealing at first glance, such an initiative does not seem very convincing when scrutinised more closely. The purpose of the ECB’s collateral policy is to ensure sufficient availability of collateral to allow a smooth implementation of monetary policy and to protect the Eurosystem in its financial operations. Using the framework for alternative purposes would be contrary to the ECB’s mandate.
The blue line represents the actual, historical losses to the banks, while the yellow line shows modeled calculations of the historical development. The broken lines show the expected development in the different stress scenarios. 3 stress scenarios with increasing severity were used. In the most severe scenario a slowdown in the domestic economy is exacerbated by a tightening of the ECB's monetary policy.