The adequacy of collateral in this respect is ensured via the following pillars: (i) market valuation should be the rule whenever possible, (ii) proper legal due diligence both as regards the asset to be accepted as collateral and also as regards the collateralisation technique used (iii) there should be minimum credit quality requirements and stringent rules and performance monitoring for all systems used to assess the credit quality of eligible assets and (iv) risk control measures, normally in the form of haircuts.
Another point I would like to emphasise is that the Eurosystem has been working to mitigate inherent pro-cyclicality in its collateral framework by extending it, by aiming at calibrating risk parameters over a medium-term horizon, avoiding strong reactions to temporary market movements, and eliminating cliff effects and broadening its acceptance of credit risk assessment systems.